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How Auto Insurance Fraud Affects You As a Consumer

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Cost is a factor for most drivers buying new insurance. There's a hidden story in those car insurance quotes that help you choose a new policy. Premium rates are on the rise because of expensive claims. Because of the connection between claim payouts and insurance cost, it should concern consumers that a staggering number of claims are fraudulent.

Fraud is a big problem in insurance, but it's in your power to stop it. You can take responsibility for the accuracy of your claim and refuse to let anyone commit fraud in your name.

Auto Insurance Fraud Is Ubiquitous, And It Costs You Money

Not all auto insurance claims are legitimate. It is a well-known problem: an ICBC survey found 47 per cent of British Columbians feel auto fraud is accepted in B.C. 79 per cent thought up to half of all claims contained fraud. In Ontario, the stats are similar. An Aviva survey found 88 per cent of people think auto shops exaggerate repair costs. Seventy-three per cent think premiums will go down if insurance companies combat fraud.

Analysis by auto insurers demonstrate this perception is correct. Industry experts say fraudulent claims are paid out to the tune of $1.6 billion to $2 billion annually. Five to 15 per cent of all money paid in premiums ends up covering fraudulent claims.

Fraud takes many forms. These include auto shops causing deliberate damage to vehicles in order to overbill during the repair process. Shops may also bill more than one insurer for the same damage. Medical clinics may ask claimants to sign forms before services are provided and then bill the insurer for services not rendered. Policyholders may also commit fraud by staging an auto theft or selling a stolen vehicle.

Ontario's high premium rates, about 55 per cent higher than the average in other Canadian jurisdictions, can be attributed in part to fraud costs. There's evidence to back up this argument. Aviva launched an undercover investigation of body shop fraud. The company deliberately smashed a number of vehicles, then compared their own assessor's damage figures to the amount billed by repair shops. Aviva found they were overbilled by 57 per cent.

Two Kinds of Auto Insurance Crime

Not all insurance fraud is the same. There are two general categories: opportunistic and premeditated fraud. Both cost insurers money and those costs are passed down to consumers.

Opportunistic Insurance Fraud - Most people may think of this kind of fraud when they consider insurance crime. This involves exaggeration or deliberate falsehoods in an insurance claim. Insureds may include existing damage in a claim for a separate, more recent collision. They may make bodily injury appear worse to get health benefits. They may claim certain property was inside a vehicle when the car was stolen in order to increase the size of the payout — even if they knew this to be untrue. In all of these scenarios, the fraudster is trying to get more than they are entitled to out of a legitimate claim.

Premeditated Insurance Fraud - This kind of insurance fraud includes such acts as reporting a loss that never occurred or deliberately staging a collision in order to get insurance money. It is not just limited to claims, however. Fraudsters may also try to avoid paying premiums by misrepresenting conditions on the insurance paperwork, such as the identity of the vehicle's primary driver.

How You Can Help to Prevent Auto Insurance Fraud

Auto insurance fraud may seem pervasive, but it can be prevented. This happens one claim at a time. As a consumer who wants to help the system function honestly, and wants to do their part to keep premiums low, you can be diligent about making sure your insurance claims are accurate. Here are some tips:

Read your insurance policy to understand your coverage.

Don't sign any blank forms, even if given to you by someone you trust, like your doctor.

Don't sign anything at the site of an accident.

Ask for detailed repair bills.

Review your claims for accuracy.

Remember, fraud has some serious consequences. If fraud is discovered, you won't get the claim paid out and your coverage may be cancelled. You may have to pay higher premiums and your opportunities to get policies in the future may be in doubt. Also, fraud is an offense under the Criminal Code of Canada, which means serious consequences. They can be easily avoided by simply being diligent about submitting an honest claim.

Reduce Fraud, Find Affordable Car Insurance Quotes

Auto insurance fraud has one obvious result: higher premiums for all drivers. To help combat the problem, keep your eyes out for potential fraud. It's a great way to start off the year 2019! To find the best rates on car insurance rates in Ontario and elsewhere in Canada, compare quotes at Rates.ca.