An ever-present, growing problem in the Canadian insurance industry is fraud. What some view as a “victimless crime” can affect thousands of insured Canadians.
A network of perpetrators working in tandem, or a single person working in a moment of duplicity, can plan and commit insurance fraud. The constant across all fraudulent claims is their result: they drive up premiums for all insurers.
Auto Insurance Fraud and the Claims Process
Auto insurance fraud can take many forms and be carried out by any number of people in an auto claim process. Don Forgeron, President and CEO of the Insurance Bureau of Canada (IBC), at the Ontario Association of Chiefs of Police meeting on June 24, 2019, warned of the tie between criminal organizations and insurance fraud:
“Fraud can be a way for organized crime to bring in revenue and support its other operations. It can be a way for dishonest people to take advantage of unsuspecting citizens – sometimes threatening them with violence or retribution. Beyond that, there are also people across our province who are put at risk every time a car accident is staged to potentially secure accident benefits for the so-called victims.”
Fraud can happen many times during the claims process, from the accident to being towed, at the repair shop or even when submitting medical expenses.
The IBC highlights five common types of insurance fraud:
- Tow truck drivers: Dishonest tow truck drivers or repair shops overcharge and bill insurance companies to profit from insurance claims. Ultimately, this act increases insurance rates.
- Medical staff: Deceitful medical staff may ask patients to sign a blank medical form and bill providers for services never rendered, or they may forge signatures to do the same.
- Staged collisions: A driver stages an accident and makes it look like an innocent driver is at fault. From there, they may claim false medical expenses, accrue a settlement, or fraudulently claim long-term benefits.
- Policy fraud: A consumer omits facts or lies about details on their policy to secure a lower rate, or make a claim.
- Stolen vehicles: Thieves sell stolen cars to unsuspecting consumers. These vehicles may be dangerous or even unrepairable.
Anyone can report suspected exaggerated claims and insurance fraud through the IBC’s anonymous tip line at 1-877-IBC-TIPS (422-8477).
How Do Insurance Companies Cope with This Annual Loss?
Many Canadians may think auto insurance fraud is an insurance company problem. But the reality is it costs consumers over $1 billion a year.
To cope with the cost of fraudulent claims, insurance companies raise premiums across the board — meaning, honest, hard-working Canadians bear the real cost of fraud.
The IBC found that in Ontario alone, auto insurance fraud costs the average consumer up to $236 per policy. That means the average driver is paying a hefty price to cover fraudulent claims.
Furthermore, staged accidents and unnecessary medical treatments take away valuable resources from the public. False emergencies can tie up paramedics, firefighters, and police from responding to legitimate medical calls. These extra health care and public safety costs can result in higher taxes.
How Can Fraud Be Stopped?
According to Forgeron, more robust anti-fraud measures and harsher penalties for committing insurance fraud must be instituted, or the average insurance policyholder will continue to pay the price.
“We are just beginning to understand the many benefits of having insurance companies work together to reduce fraud. We’re spotting trends that we couldn’t see before – when each company was trying to solve this problem on its own. To ensure this collaboration happens more often, we are working on establishing a framework that encourages insurers to share information for the purposes of fraud detection.”
Forgeron wrapped up with an appeal to the public to be part of the solution:
“One specific way in which you may be able to assist is through the government’s new Serious Fraud Office. We were encouraged when the previous government created this office – and relieved when the new government said they’d continue with it. The government has made it clear that it is willing to develop a fraud reduction strategy; that it’s willing to listen when law enforcement comes forward with information about serious fraud in Ontario. Each of us can do our part. If we do, when we do, we’ll be able to protect public safety better and deliver meaningful cost savings to people across our province.”