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How insurance fraud increases your insurance premiums

Most of us law-abiding citizens wouldn’t want to take anything that doesn’t belong to us or isn’t coming to us – most of us. But as the cliché goes, a few bad apples can spoil the bunch. In this case, those bad apples are committing fraud as it pertains to their car insurance. Let’s start with the costs. According to the Insurance Bureau of Canada (IBC), general insurance fraud costs insurers and policyholders more than $1.6 billion per year, driving up the price of car insurance. Some private insurance numbers peg the additional costs as high as $2 billion.

What is car insurance fraud?

  • Knowingly lying on an insurance application
  • Claiming previous damage to a vehicle, along with damage from a new collision
  • Claiming non-existent injuries after a collision
  • Submitting healthcare claims after a person injured in an accident has recovered
  • Making an injury or damage claim for a collision that never happened

In a recent news release distributed last March (which coincides with Fraud Prevention Month) IBC, National Director, Investigative Services, Dan Service, said, “Auto insurance fraud is an organized big business, largely unknown to consumers, that siphons resources away from our health care system, ties up our emergency services and courts, and drives up insurance costs.”

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How scammers make money from car insurance fraud

Staged collisions are another important fraud issue which can add to car insurance premiums in Ontario. Essentially, a staged collision supports false car insurance claims by “mimicking” a collision scenario and then reporting that scenario as something it was not.

Other fraud claims can include: vehicle dumping whereby an owner abandons a vehicle and claims it was stolen, false car registration in which an owner registers a vehicle at an address that has lower car insurance rates than where they actually live, exaggerated claims where the severity of damage or degree of injuries is exaggerated, and fake injury claims.

Punishments for such fraudulent claims can range from denial of claims, car insurance cancellation, or designating you as a higher risk which may lead to increased rates and difficulty in getting car insurance in the future.

There are educational efforts and places for the public to seek help on fraud issues. The IBC, and property and casualty insurers across Canada, work with law enforcement agencies, all levels of government, insurance broker organizations, and other stakeholders to raise awareness and coordinate efforts to help bring down fraud case numbers. The Provincial Auto Theft Network (PATNET), for example, is an IBC program that brings together law enforcement agencies and the insurance industry to reduce auto theft and insurance fraud.

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