TORONTO (CP) - Canadian insurers made billions more in profits last year than they have in half a decade and their gain should make drivers happy as premiums drop in 2005, an industry group said Friday.

The Insurance Bureau of Canada said auto, home and business insurers raked in about $4.2 billion in total profit in 2004. It predicted drivers will save one-third of that amount in 2005 premiums because of the industry's improved finances.

How and when individual motorists see lower premiums will depend on a number of factors, including regulations where they live, what kind of driver they are, the level of competition and when they renew their policies.

The IBC said the industry's 206 companies paid out $20.6 billion in property, casualty and auto claims last year, while investment revenues rose.

Insurers produced a 20.6 per cent return on equity, a broad measure of profitability in a continuing recovery from below-average returns between 1999 and 2003 - the industry bottomed out in 2002 with a worst-ever return on equity of 1.7 per cent.

As a result, the bureau says Canadian drivers can expect to save $1.4 billion on car insurance payments in 2005.

"Companies compete for market share, and one of the ways they quite often do that is by competing on price," Stan Griffin, chief executive of the insurance bureau, said in an interview.

"But the other very important element of all this is the reforms that governments have put in place over the last year or two across Canada."

In a separate release, the Consumers' Association of Canada characterized the industry's profit as "obscene" and called for a premium rollback.

"Governments have clearly failed to protect consumers and businesses from price gouging by the insurance industry," association president Bruce Cran said.

"The insurance industry is now in full damage control in an effort to justify their record-setting profits."

But the insurance bureau's Griffin said consumer complaints about premiums have dropped by more than 80 per cent in the last year.

Auto rates, regulated by the provinces, have already fallen in some parts of the country.

Provincial governments have been under political pressure to crack down on insurance fraud, which cost the industry an estimated $1.3 billion in 2003, and cut corporate taxes on premiums to help reduce rates.

After consumer anger about car insurance rates impacted provincial election campaigns in Atlantic Canada, New Brunswick approved premium decreases for several companies between 4.1 and 14 per cent.

Alberta is limiting soft-tissue-injury payouts to $4,000, while making it easier for high-risk drivers to get affordable coverage.

The bureau said in January that Ontario consumers will save $900 million due in part to reforms by the provincial government.

But it might take a little legwork on a consumer's part to get the most out of the expected rate drops, Griffin said Friday.

For one thing, the changes won't be reflected on a policy until its next renewal period. What's more, individual insurance costs vary widely depending on a person's driving record, the make and model of car and where they live, among other factors.

"We do also encourage people in a competitive market to shop around," Griffin said.

"Ask your broker to shop around or shop around yourself among brokers and check prices on other companies that sell directly."

Ontario approved auto insurance rate changes late last year that were 10.6 per cent lower on average than 2003. The bureau said premiums for private passenger vehicles in Ontario have fallen by 12 per cent since November 2003.

Ontario Premier Dalton McGuinty said Friday that his government will "keep working" on reducing premiums.

Alberta Finance Minister Shirley McClellan conceded the industry's profit picture looked "pretty good" but wouldn't say what she would consider excessive.

However, Friday's report prompted her to ask the new Alberta Auto Insurance Rate Board to see whether further cuts to premiums are warranted.

McClellan dismissed an allegation by the consumers' association that the province has helped the insurance industry gouge consumers.

"I think the Alberta government has been very proactive in responding to an issue that the consumers of this province raised," she said.

"That was that we have to have public liability insurance to operate a vehicle, and the costs are becoming prohibitive."