A study by two Schulich professors says that Ontario drivers were overcharged $3 billion on insurance over the course of a decade.
As accident benefits were slashed, Ontario drivers were overcharged by profitable insurance firms. The claim is made by a personal injury lawyers’ group.
The insurance industry, meanwhile, denies the allegation (big surprise). The auto insurance industry has collectively reported very weak profits, but individual companies have earned far more than the 11 per cent return on equity allowed by the Ontario government, the study found.
An analysis by professors Fred Lazar and Eli Prisman for the Ontario Trial Lawyers Association shows that the average family should have paid $100 to $120 less for auto insurance in 2013. In fact, Ontario drivers paid about $840 million too much in 2013 alone.
And to make matters worse, they’re getting less for their money.
The government, according to the lawyers’ association, has constantly cut accident benefits.
They want the Ontario auditor general to investigate.
“Premiums have been too high, and consumers in Ontario have been paying too much for auto insurance,” the study authors wrote, noting that there is “significant room” to reduce rates.
“The combination of a return on equity cap of 5.8 per cent, the 10-year rolling average for 2013, and a lower operating cost assumption could reduce auto insurance premiums by at least 7.9 per cent based on 2013 data,” they added.
In defense, the Insurance Bureau of Canada said its costs continue to rise, and pointed fingers at the lawyers, claiming that they had billed $500 million in contingency fees in 2013.
According to the authors, the cap should be no more than about 5.5 per cent, taking into account the low interest rates. The Liberal government has promised to cut auto insurance rates by an average of 15 per cent from where they were in the summer of 2013 by this August.
Whether it will happen, however, remains to be seen.
So, fellow Canadians of the road, do you think you’re overpaying for car insurance?