Why insurers incurred penalties for over-charging Alberta auto clients

Programming errors are cited as the culprit for why some Alberta auto clients have been charged higher rates than those approved by the Automobile Insurance Rate board.

Six auto insurers (ultimately owned by Economical, TD Bank and Intact) had to pay a combined total of $725,000 in administrative penalties last year for over-charging, Alberta’s superintendent of insurance said in a bulletin on enforcement activities issued Sept. 11.

“From time to time, during our rigorous audit processes, we discover errors that unintentionally result in an insurance rate being higher or lower than the rate that is filed with our various regulators. These types of errors impact a small group of customers,” Intact said in a statement to Canadian Underwriter.

The Superintendent of Insurance’s office said in its bulletin last month that a $50,000 administrative penalty was imposed on Intact in June of 2019 for charging private passenger automobile insurance premiums in excess of approved rates.

Since 2016, the Superintendent of Insurance has issued 30 penalties totalling $1.547 million for overcharging premiums, a spokesperson for the provincial treasury board and finance department told Canadian Underwriter Thursday. In addition, there were 11 penalties totalling $1.16 million for various other infractions since 2016.

“It is important to note that insurers process thousands of transactions on a daily basis,” the finance department spokesperson said. “Many of the incidents of overcharging a premium come as a result of programming errors. In most instances, insurers self-report these occurrences to the Superintendent and take corrective action to issue refunds. Where an overcharge occurs it is always repaid to Albertans with interest.”

On Dec. 12, 2019, administrative penalties for over-charging were imposed on Economical Insurance and its direct writer Sonnet for $25,000 and $50,000 respectively.

An Economical Insurance spokesperson told Canadian Underwriter that a technical error resulted both in over-charging and under-charging a small number of customers, until early 2019.

“As soon as we became aware of the error, we fully refunded any over-charged amounts to customers, self-reported the situation to the Superintendent of Insurance in Alberta, and enhanced testing with a view to preventing this type of error from happening again.”

On Nov. 25, 2019, administrative penalties for over-charging were imposed on TD Bank subsidiaries Primmum Insurance company for $200,000, Security National Insurance Company for $380,000 and TD Home and Auto Insurance Company for $20,000.

“As a part of our regular review processes we identified a system error that affected some of our customers’ policies,” a TD Insurance spokesperson told Canadian Underwriter Friday.

TD Insurance then notified the regulators and reimbursed customers, including interest.

“Some customers were under-charged as a result of the system error – and we did not seek reimbursement from those customers,” the TD Insurance spokesperson said. “We regret the inconvenience this may have caused some of our customers and have taken all measures to correct our system to ensure customers have the right coverage that fits their specific needs and circumstances.”

This is a developing story that Canadian Underwriter will be updating as more information becomes available.

Feature image via iStock.com/Ron and Patty Thomas