Consumers’ Association of Canada Calls On Canadian Governments to Protect Consumers From Secret Commissions Paid By Insurance Companies

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Ottawa, October 25, 2004 – The Consumers’ Association today called on insurance regulators across Canada to protect consumers by taking action on secret commissions paid to brokers to steer business to particular insurance companies. “Consumers suffered huge increases in auto and property insurance rates over the last year and now we know one of the reasons why”, said Mr. Cran, President of the Consumers’ Association of Canada.

“The insurance industry paid out $290 million in secret commissions last year that came straight out of consumers’ pockets”. This is one of the reasons why consumers have had to pay outrageous rates for products like auto insurance,” said Mr. Cran.

While consumers and businesses are paying record high prices for insurance the insurance industry is reporting its highest profits in history. “We believe that the impact of $290 million in secret commissions needs to be fully investigated for another reason”, said Mr. Cran.

Secret commissions provide incentives to brokers to steer consumers to particular insurance companies irrespective of whether these companies offer the best product at the lowest price. “As a result of these commissions there is a definite possibility that consumers and businesses have overpaid hundreds of millions of dollars for their auto and property insurance”, said Mr. Bruce Cran.

When a consumer purchases an insurance policy the transaction is based on an implied trust that the broker presents the best deal to a consumer. “The payment of secret commissions has broken this trust and is a conflict of interest”, said Mr. Cran. “The next time a consumer buys insurance they should ask their broker if they receive secret commissions. If so, consumers should seek out a broker who does not accept these commissions.”

Canadian Governments have also been part of the problem. “Even though the insurance companies privately disclose to regulators the payment of secret commissions Governments turned a blind eye to this practise,” said Mr. Cran. “It’s time Governments in provinces like Ontario, New Brunswick and British Columbia followed the lead of US states such as New York and California and acted to protect consumers.” The Attorney General for New York has stated that these secret commissions cheat consumers. “Our Association couldn’t agree more”, said Mr. Cran.