The Ontario Trial Lawyers Association recently published the results of a study that found drivers in Ontario pay more for their auto insurance than they should. While the study mostly affects more populated regions, Northern Ontario and North Bay drivers are also overpaying for their auto insurance coverage.
The OTLA found that between 2001 and 2013 consumers overpaid for insurance policies by $3 billion to $4 billion, with each year over that 10 year period seeing drivers pay more and more. It culminated in 2013 when vehicle owners overpaid for auto insurance to the amount of $840 million, according to the study by Fred Lazar and Eli Prisman, professors at the York University Schulich School of Business.
One potential reason for this is the fact insurance companies may be overcompensating for Ontario’s notoriety as the insurance fraud capital of Canada. This fact already results in the highest auto insurance premiums in the country and it seems drivers are being hit harder by overpaying.
“Auto insurance companies in Ontario have had a relatively free ride during the past 20 years,” Lazar wrote in the report.
The study shows that insurance providers could afford to cut their premiums by as much as 7.9 per cent and still make profit to see a return on their investment. The paper was also critical of how the Financial Services Commission of Ontario (FSCO) regulates auto insurance and how the body dictates how insurance companies calculate premiums.
Lazar pointed out that the auto insurance industry in the province is profitable and that companies could half equity returns to half the current amount, to 5.7 per cent. The OTLA study looked at 18 of the major insurance providers in Ontario and found that those major industry names had 17.5 per cent equity return, higher than the guideline amount stipulated by the province. Any thoughts that this is just a cycle the industry is moving through are inaccurate as auto insurance premiums have been rising for 20 years.
A spokesman for Ontario’s Minister of Finance said the province is still committed to reducing auto insurance rates, but that “reviewing the financial statements and economic activity of private companies is not within the Auditor General’s mandate.”