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October 12, 2006
Auto insurer issued penalty for overcharging premiums
Edmonton... The Superintendent of Insurance has issued a $45,000 penalty to State Farm Mutual Automobile Insurance Company for failing to charge their approved premiums for compulsory auto insurance in relation to a new business discount, a violation of the Insurance Act. Approximately 13,500 Alberta auto insurance policies were affected, resulting in 6,400 policyholders being overcharged about $475,000 in premiums.
On June 1, 2000 State Farm introduced a five per cent new business discount for auto insurance in Alberta. In September 2003, the insurer became aware the discount was not being applied to all qualifying policies as the result of administrative error. State Farm did not implement an action plan to correct the premium overcharges until November 2005. The company began reimbursing policyholders with interest in December 2005 and unclaimed premium refunds will be given to charity.
The penalty issued to State Farm reflects the insurer's failure to charge the correct premiums as well as a failure to notify the Superintendent of Insurance about the issue in a timely manner and to take sufficient steps to correct the problem. Twenty-six months passed after the premium discount error was discovered before State Farm implemented corrective action. During that time, policyholders continued to be overcharged.
State Farm policyholders with questions should contact their local State Farm insurance agent.
Consumers with questions or concerns about their auto insurance are welcome to contact the Office of the Superintendent of Insurance at ([780] 422-1592, for toll-free access, dial 310-0000 then [780] 422-1592), or the Alberta Insurance Council (Edmonton: [780] 421-4148; Calgary: [403] 233-2929). Additional information is also available at
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Media enquiries may be directed to:
Marie Iwanow
Director of Communications
Alberta Finance
Ph: (780) 427-5364
To call toll-free within Alberta dial 310-0000.
Copyright(c); 2006 Government of Alberta