Cost is a factor for most drivers buying a new auto insurance policy. One of the reasons auto premiums are on the rise is because of expensive claims. On that note, it should concern consumers that a staggering number of claims are fraudulent.
March is Fraud Prevention Month in Canada. As auto insurance crime increases insurers’ claims costs, and in turn, drives up premiums, it’s worthwhile for consumers to consider the impacts fraud has on car insurance. According to the Insurance Bureau of Canada (IBC), insurance fraud costs Ontario drivers up to $236 per year per policy.
Fraud is a big problem in insurance, and in the results of a recent Aviva survey, it's clear Canadians overwhelmingly support strong action to fight insurance fraud and clearly correlate fraud with increased premiums. The Aviva survey finds 87% of Canadians say they want more time and money spent on policing and prosecuting fraudulent insurance claims. Furthermore, 72% of Canadians agree prosecuting perpetrators of fraud may result in lower auto insurance premiums.
Auto Insurance Fraud Costs You Money
Industry experts say fraudulent claims are paid out to the tune of $1.6 billion to $2 billion annually. Five to 15% of all money paid in premiums ends up covering fraudulent claims. Moreover, 2018 data from Statistics Canada reveals the rate of fraud (including identity theft and identity fraud) continued to increase for the seventh year in a row, with a 12% increase between 2017 and 2018, marking a 46% increase over the rate reported a decade earlier in 2008.
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% higher than the average in other Canadian jurisdictions, can be attributed in part to fraud costs.
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 and understand the terms and conditions of your coverage
- Check with your provincial regulator to ensure you are working with a licenced 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 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 auto 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 higher premiums. 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.