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Fraud Prevention Month: How Fraud Affects the Cost of Car Insurance

March 1, 2021
4 mins
Woman laying on her couch in small urban apartment on her laptop

Ask any Canadian driver what they want from their insurer and chances are they’ll tell you they want to pay less for car insurance. No eye-popping revelation there. There are many ways to reduce your insurance bill, but the cost of fraud is bilking Canadian drivers to the tune of $1 billion a year; some say it’s as high as $2 billion annually. Think of that.

As drivers, when we ask ourselves why car insurance premiums are seemingly always on the climb, it’s worth noting the cost to repair modern vehicles nowadays is becoming (or has become) ridiculously expensive, as one woman in Brampton, Ontario, discovered recently.

But fraud is also a significant factor few of us may consider. According to the Insurance Bureau of Canada’s (IBC) numbers, insurance fraud costs Ontario drivers up to $236 per year per policy. Given the average premium price in Ontario in 2020 was $1,616, according to RATESDOTCA’s data, shelling out a couple hundred bucks a year to cover the cost of fraudulent claims might make your blood boil.

March is Fraud Prevention Month in Canada. As fraud increases insurers’ claims costs, and in turn, drives up premiums, what are those of us who abide by the rules if we need to file a claim to do?

Take heart: there is strength in numbers as the results of a 2020 Aviva survey makes clear. That poll finds Canadians overwhelmingly support taking strong action to fight insurance fraud, with 87% of Canadians saying they want more time and money spent on policing and prosecuting fraudulent insurance claims. Furthermore, 72% of Canadians agree prosecuting perpetrators of fraud may help reduce auto insurance premiums.

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Types of insurance fraud and how to detect them

Whether we’re talking about car insurance or home insurance, not all insurance fraud is the same.

Concerning auto fraud, it could be a case of auto repair shops causing deliberate damage to vehicles to hike up what they charge. Shops may also bill one insurer more than another for the same repair work. 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.

There are two general categories: opportunistic and premeditated fraud. Both cost insurers money and those costs are passed onto consumers:

  1. 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 a bodily injury appear worse to get health benefits. They may claim certain property was inside a vehicle when the car was stolen 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.
  2. Premeditated Insurance Fraud. This kind of insurance fraud includes such acts as reporting a loss that never occurred or deliberately staging a collision 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 a vehicle's primary driver.

How you can help prevent car insurance fraud

Car insurance fraud may seem pervasive, but it can be prevented. 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 and understand the terms and conditions of your coverage.
  • Check with your provincial regulator to ensure you are working with a licensed insurance professional.
  • Never sign a blank form, even if given to you by someone you trust like a doctor.
  • Don't sign any document at the scene of an accident.
  • Ask for a detailed repair bill from the collision repair shop fixing your vehicle.
  • Review your claims for accuracy.

Fraud is an offence in the Criminal Code of Canada, and if you are convicted of such a crime, it has serious consequences. If fraud is discovered, your claim will not be honoured and it’s possible your car insurance coverage may be cancelled. Additionally, you may have trouble getting an auto policy in the future, and if you do, it’s possible you may have to pay a higher premium. You can avoid all of those risks by simply being diligent about submitting an honest claim.

If you think you may be a victim of auto insurance fraud or are aware of someone committing the act, contact your insurance provider and report it. Additionally, you can report it to Crime Stoppers, the Canadian Anti-Fraud Centre, as well as taking advantage of IBC’s anonymous tip line to report insurance crime.

Liam Lahey

Liam Lahey is a versatile marketer with experience as a staff and freelance writer for many business and technology publications and newspapers. He previously worked as the editor and media spokesperson for RATESDOTCA, handling home, auto, and travel insurance topics.

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