Car insurance fraud is around a $2 billion per year problem in Canada and growing annually. As it continues to grow the insurance governing bodies like the Insurance Bureau of Canada (IBC) continue to urge the public for more awareness through programs like fraud prevention month, as they seek to seek out support in the fight against fraud.
Provincial governments have made recent strides in combating the issue. For instance, in 2018, Ontario launched their Serious Fraud Office, but consumers are still bearing the brunt of the cost of fraud.
Insurance companies aren’t required to report fraud anywhere outside Ontario, according to Ashish Bhargava, vice-president of fraud and analytics at Aviva Canada. And even in Canada’s biggest province, only an attestation (or proof) is mandatory.
IBC reports that Canadian drivers end up paying an average of $125 annually in to combat car insurance fraud. Ontario drivers pay an average of $236 every year to cover the cost of insurers getting defrauded.
There are many ways Canadians drivers may fall victim, starting with phoney auto insurance offers and ending at the body shop, or even a healthcare facility, should the collision warrant it.
Most common car insurance fraud: 3 examples
1.Buying fake insurance auto insurance fraud
Someone impersonating an insurance broker advertises and offers to find you a lower rate than what you’re currently paying, for a fee. So, understand insurance brokers don’t take fees from the consumer because the insurance company pays them a commission.
In this insurance fraud case, after they get all your driving history and information, the imposter calls a real insurance company, lies about your details and you get a lower rate. When you get into an accident, the real insurer denies your claim because the phoney insurance broker provided false information.
Beware, some fake auto insurance advertisements may emulate well-known companies. They buy ads in local flyers next to authorized insurers, according to the Financial Services Commission of Ontario. The fake company offers a very low premium, but never actually sets up any coverage for you after paying. Even though you, the driver thought you were insured, you’re now breaking the law by driving without insurance.
If you want to play it safe, you can find legitimate Ontario car insurance quotes from us at Ratehub.ca.
2. Insurance fraud: car accidents
Fraudsters are practiced professionals and have a handful of techniques they use to stage an accident to make it look real.
A) The Swoop and Squat
As named by the Insurance Bureau of Canada, involves two conspiring vehicles and one innocent vehicle.
One fraudster will change lanes in front of another fraudster and slam their brakes. The second fraudster, now seeing their co-conspirator stopped in front of them, will also slam their brakes.
The innocent driver, with two vehicles, suddenly stopped in front of them, rear ends the car in front of them and damages both the conspiring vehicles.
The stopped fraudsters have made it appear as though the innocent driver is at fault in the accident. No Fault insurance only means that you’ll deal with your insurer when filing the claim, you can still be at fault.
B) The Drive Down
This is where an innocent vehicle in a parking lot gets waved to come out of their parking spot by an oncoming car.That oncoming car then intentionally drives into an innocent vehicle. The driver of the vehicle that initiated the accident will later deny that they waved the innocent driver to come out of their parking spot.
C) The Left Turn
This is where an innocent driver is waved on to make a left turn across the lane of an oncoming car.
The driver of that oncoming car waits until the innocent vehicle begins making the left turn and then drives into the car mid-turn. The oncoming vehicle’s driver later denies they waved the turning vehicle through.
3. Unintentional auto insurance fraud
In truth, many Canadians may accidentally commit low-level auto insurance fraud without even knowing it.
Registering a vehicle at a family members’ residence for a cheaper insurance rate or listing someone as a primary driver when they’re not, constitutes as fraud.
If you’re a primary driver and you’re looking to shop for auto insurance quotes, make sure it’s from a trusted resource.
Even exaggerating injuries following an accident where you incurred real injuries is considered fraud. Cases where someone claims they can’t work because of an accident and then proceeds to find employment are punishable by fine or imprisonment.
How to prevent insurance fraud after a collision
In the immediate aftermath of an accident, it’s difficult to know if you’re the newest victim of fraud. You can, however, prevent fraud by following a series of steps after any collision:
- Stay calm and don’t confront or argue the conditions of the crash with the other driver. Save your story for the police and the insurance adjuster.
- Take pictures and notes of all vehicles following the accident, location of the collision, weather conditions, license plates, and insurance policies. Take note of any passengers and get their names.
- Make a note of any witnesses and get their contact information. Additionally, scan the area for security cameras that may have recorded the scene of the accident.
- Take pictures of your vehicle immediately following the repairs.
For more information check out our blog: “What to do after a car accident in Ontario”
How to report car insurance frauds
To make sure the insurer has the correct licensing, every province has an online directory. The government expects you to report an insurance agent or broker who does operating without a license. Every insurance broker in Canada is required to have a license. The Registered Insurance Brokers of Ontario has an online directory. Other provinces mostly rely on the Insurance Brokers Association of Canada to list all of their licensed professionals. If you can’t find your broker or insurance company on those directories, something is amiss.
If you you believe you’re the victim of fraud either by a scam driver, a tow truck, a mechanic, speak with your insurer. Your discomfort is understandable, so know the Canadian Anti-Fraud Centre and the Insurance Bureau of Canada’s anonymous online tip forms are there for you to report suspicious behaviour.
NOTE: No legitimate insurance company in Canada accepts e-transfers or money wiring services to pay premiums. Never sign a blank document, thieves can work wonders with a signature.
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How auto insurance fraud pays its criminals
Auto insurance fraud on the road is where the criminal element becomes very dangerous. It begins with a recruiter finding a team of participants to stage an accident, according to a video produced by the Insurance Bureau of Canada.
Following the accident, a tow truck company who’s in on the scam will come and tow your car. Later, they charge the insurance company an excessive amount.
The tow may take your car to an auto body repair shop, also in on the fraud,. There additional damage could be done to your car, which increases the size of your claim. That auto body shop will then charge the insurance company for additional repairs.
While all this is going on, the participants in the fake accident go to a private rehab clinic. The clinic coaches on how to show signs of injury. The co-conspiring clinic will assist the injured to make an insurance claims under the accident benefits portion of their insurance. Accident benefits covers services like medical care (e.g physiotherapy), housekeeping, caregiving and income replacement.
The recruiter in charge of this entire process, gets kickbacks from the tow truck, the mechanic, and the rehab clinic, the Insurance Bureau of Canada says.
Car insurance fraud punishments
There are three types of fraud according to the Criminal Code of Canada: Fraud under $5,000, Fraud over $5,000 and Fraud over $1 million.
- Auto insurance fraud under $5,000 carries a maximum sentence of two years in jail.
- Car insurance fraud over $5,000 earns the convicted party a maximum of 14 years in jail.
- Auto insurance fraud over $1 million carries a minimum sentence of two years behind bars.
The Bottom Line
Being scam conscious is our only hope.
Car insurance companies are there to protect you from risk and care for you and your car. They also provide coverage for the not-at fault driver and their car should you be found at fault. Remember, no fault only means you deal with your insurer, you only worry about your rate increasing, and not the increasing costs of fraudulent claims.
Many Canadians may be under the impression that the police or insurance companies are there to protect them against auto insurance fraud, but it’s quite the opposite.
Insurers and law enforcement, for better or worse, rely on drivers to catch to fraudsters and then report them.
Ordinary drivers knowing how to spot fraud and document evidence of it occurring is one of the few lines of defence Canadians.