N.B. drivers overcharged on auto insurance
By Robert Jones, CBC News
Posted: Nov 21, 2012 8:10 AM AT
Last Updated: Nov 21, 2012 8:31 AM AT
New figures show New Brunswick drivers likely overpaid for auto insurance by $71 million last year, according to the General Insurance Statistical Agency. (David Zalubowski/Associated Press)
New figures show New Brunswick drivers likely overpaid for auto insurance by $71 million last year, the ninth year in a row provincial drivers have been significantly overcharged despite government regulation.
According to the General Insurance Statistical Agency (GISA) — the body that collects auto insurance data for the six provinces served by private insurance companies — New Brunswick drivers paid 74 per cent more in car insurance premiums in 2011 than they generated in claims.
It amounts to a difference of $158 million.
That's the biggest gap recorded in favour of insurance companies since 2006 and $71 million higher than required to achieve approved profit targets, according to one study.
Last year, an auto insurance expert hired by the provincial government to challenge rate applications of two companies in front of the New Brunswick Insurance Board said a five-year review of rates, claims and costs showed the industry needed to charge an average of 41 per cent more for premiums than they paid out in claims in New Brunswick to obtain a 12 per cent after-tax return on equity approved by the board.
But Paula Elliot said her review showed the industry has routinely been charging and earning much more than that for years, with board approval.
According to GISA, New Brunswick drivers were charged a total of $3.4 billion for auto insurance in the nine years between 2003 and 2011, even though drivers only generated $1.86 billion in claims.
That's $792 million more than the amount suggested in Elliot's study.
Last year, the provincial Liberal party raised concerns about auto insurance rates in the legislature, openly blaming the problem on poor regulation of the industry by the New Brunswick Insurance Board and its Progressive Conservative appointed chairman Paul D'Astous.
The Progressive Conservatives countered that most Insurance Board members other than D'Astous were actually Liberal appointees.
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