Ontario drivers overcharged $3 billion on insurance: Study

InsuranceBusiness.ca, by IBO 

Drivers in Ontario overpaid on their auto insurance by about $3 billion over the past decade – even as accident benefits have been cut.

That’s the crux of a new study conducted by two York University professors for the Ontario Trial Lawyers Association, and reported on in the Toronto Star. According to professors Fred Lazar and Eli Prisman, the average Ontario family should have paid $100 to $120 less for auto insurance in 2013, adding up to a total of $840 million in overcharges that year.

Additionally, individual auto insurance companies have earned significantly more than the 11 per cent return on equity allowed by the Ontario government, despite cuts to accident benefits.

“Families in the province are paying more and getting less,” Steve Rastin, president of the Ontario Trial Lawyers Association, said at a press conference last week.

The association, whose members specialize in personal injury law, is hoping the Ontario auditor general will investigate.

The insurance industry rejects the study’s claims, pointing out that the auto insurance industry as a whole reports very thin profit margins: -1.1$ in 2001 through 2011, 4.2% in 2012 and 2.4% in 2013.

Meanwhile, claims costs continue to rise while the government regulates premiums, said Insurance Bureau of Canada Vice President Ralph Palumbo. The IBC also asserts that lawyers themselves are adding to the problem by billing excess contingency fees that cost consumers an estimated $500 million in 2013.

 “Real reforms to the auto insurance product have been ongoing and continue and are reducing the cost of auto insurance in Ontario,” Palumbo said. “If the lobbyists and well-heeled lawyers want to know who is driving up insurance costs, they need to take a look in the mirror.”

Palumbo added that the IBC is continuing to work toward less expensive insurance premiums for Ontario drivers.

“This, of course, is not easy, but it can be done,” he said. “The insurance industry is working successfully with the Ontario government so that the auto insurance product works for consumers.”