Ontario Consumers Make $702 M Overpayment on Auto Insurance, Study Says
Ontario consumers likely made a $702 overpayment on auto insurance premiums in 2014, according to a study conducted by the Ontario Trial Lawyers Association (OTLA).
Despite a six-point rise in the Ontario auto accident benefits claims ratio, it showed that insurance consumers "likely overpaid by $840 million and $702 million in 2013 and 2014 respectively."
These latest results were part of a study that had recently been updated with new data on October 14.
The Insurance Bureau of Canada criticized the numbers, stating that the study’s authors ignored 25 percent of Ontario’s auto insurers who were not making any money.
"It is reasonable to focus only on the profitable companies and ignore those with consistent negative ROEs - the chronically unprofitable companies," Fred Lazar and Eli Prisman, the study’s authors, wrote.
Ontario recently changed their method of assessing auto insurance rates to a system called “return on premium” (ROP) approach to more accurately reflect profits and costs for insurance companies.
Under this system, insurers who provide auto coverage to the public are required to submit any proposed rate change, along with supporting documentation, to the Financial Services Commission of Ontario (FSCO).
They review the proposals to ensure rates aren’t going to be excessive but, at the same time, are not going to endanger the company’s ability to remain solvent. FSCO set the ROP standard at 6 percent.
Lazar and Prisman state this number is too high; they assert their recommended 5.7 percent ROP benchmark offer consumers more reasonable options for auto insurance premiums.
IBC spokespersion, Ralph Palumbo, noted there are a "number of factors contributing to the cost of auto insurance," including distracted driving, fraud and plaintiffs' legal fees.
"We are committed to bringing down the cost of premiums for Ontario's drivers," Palumbo stated. "The insurance industry is working closely with the Ontario government to implement their latest reforms, which will help return more money to Ontario consumers."
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