The Consumers’ Association of Canada (CAC) 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 Bruce Cran, CAC president, in a release.

“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 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 Cran.

According to CAC, 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 Cran.

The CAC says 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 Cran.

The CAS adds that 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 Cran. “It’s time Governments in provinces like Ontario, New Brunswick and British Columbia followed the lead of U.S. states such as New York and California and acted to protect consumers.” In his probe of insurance brokers starte last week, Attorney General for New York Eliot Sptizer has stated that secret commissions cheat consumers.