(Photo credit: GotCredit/Creative Commons)
Car insurance is mandatory for all drivers and Ontario drivers are likely aware that they pay some of the highest insurance rates across Canada.
But a recent study commissioned by the Ontario Trial Lawyers Association (OTLA) shows that Ontario consumers may have overpaid between $3 to $4 billion in auto insurance between 2001 to 2013.
In 2013, consumers overpaid auto insurance by $840 million and based on that year’s profit data within the insurance industry, insurance premiums could be dropped by 7.9 per cent, wrote the study’s co-authors, Fred Lazar and Eli Prisman, both professors at York University’s Schulich School of Business.
“Auto insurance companies in Ontario have had a relatively free ride during the past 20 years,” according to the report.
“A modest reduction in the operating cost assumption can produce savings in the hundreds of millions annually for consumers of auto insurance in the province.”
The study examines the profitability of the industry that influences the Return on Equity (ROE) rates set by the Financial Services Commission of Ontario (FSCO), which is used as a benchmark when an insurance company’s rate filings are reviewed.
In October 2014, the FSCO replaced its 11 per cent ROE with a new six per cent Return on Premium, which the report’s authors say is “out of line with current financial market realities” and “will result in significant cost increases for all policyholders.” In fact, insurance premiums would have risen by $275 million if this policy change was implemented last year and the change is equal to a 12 per cent ROE, says the study. Instead, the report recommends setting a ROE benchmark of 5.7 per cent, which is equal to a Return on Premium of 1.8 per cent.
Based on the report’s results, the OTLA wants the province’s auditor general to review how car insurance rates are set, according to CBC News.
Recently, the Ontario government passed legislation to reduce car insurance rates. While drivers may be tempted to save money on car insurance it’s important that you check to ensure that your car insurance is legitimate to avoid being a victim of auto insurance fraud.
In the unfortunate scenario where you need to collect vehicle accident benefits due to an injury, the personal injury and accident lawyers at Neinstein Personal Injury Lawyers can help. They have been dealing with all accident related issues throughout Ontario for over 45 years. We know how to get you the compensation that you deserve and get your life back in order after being in a car accident. Call us at 416-920-4242, set up a free consultation, and come speak with us.
Greg Neinstein
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