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StatsCan Data Misleads: Fraser Institute


January 1, 2004   by Canadian Underwriter


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Statistics Canada data on auto insurance premiums is not only misleading, it caused the Bank of Canada to incorrectly hike interest rates, suggests a new study by right-wing think tank The Fraser Institute.

The study says that StatsCan has been incorrectly measuring auto insurance inflation for the last seven years, overstating provincial auto insurance increases and thereby artificially hiking inflation. “StatsCan also adjusted its price measures in an inconsistent manner and did not properly account for the changing value of insurance over time,” the institute charges.

“The mismeasurement of auto insurance premiums since at least 1996 is a black eye for Canada’s official statistical agency,” says Mark Mullins, director of Ontario policy studies for The Fraser Institute. “Basic mistakes were made that ended up distorting overall consumer price inflation.”

The StatsCan data also played a role in public perceptions of auto insurance, specifically in this summer’s New Brunswick provincial election. “A search of public commentary on auto insurance pricing shows that this province accounted for most of the sensational reporting of exceedingly large and rapid price increases, now known to be false,” states an institute release.

The study contends that if the rising value of auto policies is taken into account, then the “true” price of auto insurance likely dropped since 1997.

In terms of the Bank of Canada decision to raise interest rates last spring, the institute claims inflated auto insurance numbers distorted core consumer prices, artificially inflating them when in fact they had remained moderate. “The effect these interest rates had on the rising Canadian dollar and the economy will last through next year.”

Better data is needed from StatsCan is needed for an informed debate on auto insurance, Mullins says.


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