Whether it's a staged collision, arson or a simply an exaggerated claim, insurance fraud comes in many forms. But one thing is clear: you’re the person that ends up paying for it.
At least 15 cents of every dollar policyholders pay for their insurance policies goes towards paying out false claims, according to the Insurance Bureau of Canada.
Industry statistics suggest the most common types of insurance fraud as staged auto theft, arson, fake damages and inflated claims. While many bogus claims are the work of organized crime, individual policyholders are often equally at fault.
Staged accidents usually contain one of three elements: fake auto accidents with false injuries, misrepresentation about cars being hit while parked, and “victims” being added to real or fake accident reports.
Last year, in an investigation dubbed Project Whiplash, Toronto police laid a total of 130 charges stemming from 77 collisions police say were staged. A number of physiotherapy clinics across Toronto were implicated in the scam, and accused of submitting false invoices to insurers.
Because insurance companies would notice if the same people repeatedly submitted claims for accident-related injuries, fraud artists frequently recruit people to be the names in different staged accidents.
In some auto insurance fraud schemes, no accident ever really happens. The criminal reports an accident and subsequent injury, and makes a claim, but the accident only exists on paper.
In other cases, police are called to the scene of an alleged “hit and run,” where only one car is present, and damage has been fabricated.
Although it’s clearly organized rings like these that make the headlines, the most common type of insurance fraud actually involves someone exaggerating a legitimate claim.
Backdating a disability claim, for instance, raises the costs of benefits plans to employers and affects group rates. The same goes for bogus claims by car owners that typically appear after an accident or break in.
Fraudulent claims range from individuals inflating the value of stolen possessions or asking auto shops to pad a repair bill to simply making claims for parts they never used or were purchase used.
To combat being a car insurance fraud victim and avoid having a costly claim on your insurance record, the IBC recommends the following if you’re involved in any type of auto accident: