What is Insurance Fraud and Why is it Costing You So Much Money?

Insurance fraud might seem like a victimless crime – after all, it’s only big companies losing money, right? The truth is that this common crime is costing regular drivers every time they pay their insurance bill. So, what is insurance fraud and why is it costing you so much money?

photo supplied, courtesy of guest blogging network

Auto insurance fraud is an attempt to deceive insurance companies as a way to make money. The IBC estimates that insurance fraud costs Ontario drivers an estimated $1.6 billion each year, or, an extra $236 per person.

The Insurance Bureau of Canada (IBC) divides auto insurance fraud it into two categories: opportunistic and premeditated.

Opportunistic fraud refers to when individuals use a legitimate loss to inflate their claim, such as including pre-collision damage in a repair bill following an accident, causing additional damage after an accident to increase the claim payment, and making a claim for property that was not actually stolen in a theft. For example, a recent investigation by a Canadian insurer revealed that 9 out of ten auto body shops participated in opportunistic fraud, charging the insurer $61,000 to cover $30,000 worth of damages.

Premeditated fraud refers to an instance where someone devises a way to claim an insured loss. This can include staging a collision, making a claim for a collision that never happened, or submitting a false report of a stolen vehicle. Manitoba Public Insurance shared two notable instances of premeditated fraud from 2018: in one case, the driver deliberately parked their vehicle out of sight and reported it as stolen; in the other case, a woman submitted a claim for injuries from an accident she wasn’t involved in.

Currently, insurance providers and provincial governments are searching for ways to combat insurance fraud. The Ontario government is looking to establish a Serious Fraud Office to handle the issue, along with developing standard treatment plans for common collision injuries and creating independent examination centres to provide medical assessments. In addition, one insurer suggests banning third party referrals (like from tow-truck drivers who get paid to bring cars to specific shops) and making it illegal for mechanics to ask customers to sign blank work orders.

Drivers can also do their part to prevent and report auto insurance fraud. For example, the IBC recommends that drivers contact their insurance company if a stranger tries to direct them to an unknown repair shop, doctor or legal representative. In addition, they ask that drivers never sign blank insurance claim forms or work orders. Drivers should also be involved and knowledgeable about any claim that they make, checking their records against statements from the insurance company to make sure there were no charges for goods or services not received. Finally, drivers should report suspected fraud to their insurer, the police, or the IBC.

While you might not be able to get back the extra $236 you’re paying in car insurance because of insurance fraud, you can still take steps to lower your bill. Contact your insurer to find out if there are any opportunities to save money and, when it’s time to renew your policy, be sure to compare quotes to find the best plan available.

Author: Jacob Maslow