Fraud Prevention Month: How fraud affects the cost of car insurance

This article has been updated from a previous version.

Ask any Canadian driver what they want from their insurance provider, and chances are they’ll tell you they want to pay less for car insurance — no big revelation there. And while there are many ways to reduce your insurance bill, 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.

According to the Insurance Bureau of Canada (IBC), insurance fraud costs Ontario drivers up to $236 per year per policy. Given the average premium price in Ontario in 2021 was $1,555, according to RATESDOTCA data, shelling out a couple of 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 insurance providers’ claims costs, and in turn, drives up premiums, what are those of us who abide by the rules when filing a claim to do?

There is strength in numbers, as the results of a 2020 Aviva survey make clear. The poll found that Canadians overwhelmingly supported taking strong action to fight insurance fraud, with 87% of respondents saying they wanted more time and money spent on policing and prosecuting fraudulent insurance claims. Furthermore, 72% of those surveyed agreed prosecuting perpetrators of fraud might help reduce auto insurance premiums.

Types of insurance fraud and how to detect them

There are two general categories of fraud: opportunistic and premeditated fraud — both cost insurance providers money, which can trickle down to consumers in the form of higher premiums.

Opportunistic insurance fraud

This type of insurance crime involves exaggeration or deliberate falsehoods in an insurance claim.

Here are some examples of opportunistic insurance fraud:

• A driver includes existing damage in a claim for a separate, more recent collision.
• A person makes a bodily injury appear worse to get health benefits.
• A driver claims that specific property was inside their vehicle when it was stolen to increase the payout size — even if they know this to be untrue.

In these scenarios, the fraudster tries 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 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, you can do your part to keep premiums low by diligently 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 work with a licensed insurance professional.
• Never sign a blank form, even if given to you by someone you trust, such as a doctor.
• Don’t sign any document at the scene of a collision.
• Ask for a detailed repair bill from the collision repair shop.
• 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 you risk having your auto insurance policy cancelled altogether.

Additionally, you could have trouble getting an auto policy in the future, and when you do get coverage, you may see a higher premium. This is when it would be in your best interest to compare auto insurance rates to ensure you’re getting the lowest rate possible. However, in this case, you can avoid a higher premium 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, report it to Crime Stoppers, the Canadian Anti-Fraud Centre, or IBC’s anonymous tip line to report insurance crime.