Ontario drivers overpaid for auto insurance by $840M in 2013: report
TORONTO – A new York University report suggests Ontario drivers overpaid for their auto insurance by $840 million in 2013. That works out to about $100 for every licenced driver in the province.
The study, completed by Schulich School of Business professors Fred Lazar and Eli Prisman and commissioned by Ontario Trial Lawyers Association (OTLA), calls for a full review by Ontario’s Auditor General.
“We estimate that consumers in Ontario may have overpaid for auto insurance by between $3 and $4 billion over the period 2001 to 2013,” the report states.
The study also says “the profit benchmark set by Ontario’s insurance regulator at 11 per cent return on equity, should be no more than 5.5 per cent given today’s low interest rate environment.”
Ralph Palumbo from the Insurance Bureau of Canada shoots down those numbers.
“Three to four billion is not right,” said Palumbo. “That’s an assumption.”
The OTLA says Ontario’s insurance regulator recently changed the profit cap, allowing insurers to earn even higher profits.
“It is now up to the government to do the right thing and implement an immediate, orderly reduction in the profit cap and ensure that savings are passed along to consumers,” said President of OTLA Steve Rastin in a media release.
When it come to high premiums, Palumbo points the finger at the other players involved with claims.
“I’m talking about service providers, like trial lawyers,” said Palumbo.
Rastin shoots down that accusation.
“My fees, or fees of any lawyer doesn’t change the cost to the system,” Rastin said.
The Ontario legislature had passed a bill last fall aimed at reducing car insurance rates an average of 15 per cent by this August from where they were in the summer of 2013.
The government said premiums have fallen six per cent since it first introduced the bill, which is designed to tackle fraud to lower costs for insurance companies.
Provincial Finance Minister Charles Sousa said 21 of the 120 auto insurance companies in Ontario have already lowered their premiums an average of 10 per cent.
With a files from Alan Carter and The Canadian Press