This article has been updated from a previous version.
Insurance fraud generally falls into two categories: opportunistic and premeditated. Opportunistic fraudulent claims tend to involve inflating legitimate claims, such as including pre-existing damage to a driver’s car on an auto insurance claim after a recent collision, or a homeowner saying a specific valuable was in their house during a fire when it really wasn’t.
Premeditated fraud, meanwhile, can include reporting a loss that never occurred, or staging a collision and colluding with auto body shops, towing companies, and health providers to inflate the costs of those services.
According to the Insurance Bureau of Canada, insurance fraud costs Canadians over $1 billion every year. And while comparing car insurance rates annually is your best defense against overpaying, the reality is that when insurance providers are forced to pay out large amounts of money for fraudulent claims, the cost of premiums will increase across the board.
“Insurance crime is not a victimless crime,” says Terri O’Brien, the chief executive officer of Équité Association, a property and casualty insurance industry consortium focused on premeditated fraud prevention.
Insurance providers are increasingly using artificial intelligence (AI) to stop fraudsters in their tracks. Here’s how.
Using AI to detect insurance fraud
Last year, TD Insurance introduced AI-based fraud prevention technology to aid in the detection of suspicious claims. The automated fraud detection technology conducts fraud risk scoring in real-time and flags potential claims much more efficiently and quickly.
On the group insurance side, the Canadian Life and Health Insurance Association also launched an industry-wide initiative to use AI on pooled claims data from all its members to detect and investigate benefits fraud. And most recently, Équité Association said it was partnering with Shift Technology to build a national AI-powered fraud detection system that will analyze claims data from property and casualty insurance providers to spot patterns of fraud.
“Fraudsters have patterns of behaviour and tell-tale signs or data elements that identifies who they are,” says O’Brien, adding that insurance fraud is becoming more sophisticated.
“The use of AI to detect fraud or crimes is something that has been successfully done in other jurisdictions, and we’re doing it now in Canada.”
According to Shift Technology, AI can identify factors that would point to fraud, such as whether one of the involved parties in a collision was in another collision recently, if the first-party vehicle had low or no damage but multiple people injured in the third-party car, and if the first and third party live near each other.
AI fraud detection can also help insurance providers reduce the number of legitimate claims that get accidentally identified as fraudulent (known as false positives in the industry) and pay out genuine claims more quickly.
How to contest an accusation that you’ve made a fraudulent claim
Insurance fraud has serious consequences for the perpetrators. If a claim is proven to be fraudulent, the insurance provider won’t pay it out, could cancel the policy, and may potentially sue for any costs and damages.
Insurance fraud could also lead to large fines or jail time. And insurance companies may even deny coverage to those previously involved in making false claims.
While AI is improving insurance providers’ fraud-detection capabilities, the potential for a claim to be incorrectly identified as fraudulent still exists. The best way to ensure your claim is paid out is to take detailed notes and photos as soon as you’re able and keep track of any documents that result from the event, such as medical or police records.
If you want to dispute the insurance company’s decision, the Insurance Bureau of Canada recommends first contacting your insurance representative or the insurance provider’s claims manager.
If the issue isn’t addressed, you can file a complaint with the company’s complaints liaison officer or ombudsperson and provide them with all documentation you have. Dispute resolution practices vary from province to province.
Don't waste time calling around for auto insurance
Use RATESDOTCA to shop around, and compare multiple quotes at the same time.