Alberta’s Superintendent of Insurance has issued a $45,000 penalty to State Farm Mutual Automobile Insurance Company for failing to charge approved premiums.

The superintendent reports that on June 1, 2000 State Farm introduced a 5% 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. It says that the firm 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, it added. Approximately 13,500 Alberta auto insurance policies were affected, resulting in 6,400 policyholders being overcharged about $475,000 in premiums.

“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,” it said. “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.”