Insurance Fraud Is Costing Honest Clients Money
Auto insurance fraud ultimately costs the honest client money and the best way to prevent this crime is to be proactive, understanding how fraudsters cheat the system and learning what you, the consumer, can do to prevent yourself and your insurer from becoming a victim.
One thing insurance consumers need to know is that the premiums they pay are based on actuarial studies for risk and the cost of repairs and replacement when accidents or incident occur. Of course, when criminals take advantage and defraud an insurer, the cost ultimately comes back to the consumer and we all want to prevent this from happening.
One of our industry partners, Aviva Insurance, has been studying 25 years of documentation and shared their findings in some detailed reports that reveal how fraudsters take advantage of insurance consumers.
Three Ways Fraud Occurs In The Process Of Obtaining Insurance
1) Unethical or Improperly Licensed Intermediaries.
These fraudsters act as insurance experts and prey on consumers who may otherwise have difficulty obtaining insurance. They act as a broker and take a fee for setting up a policy, often providing false and fraudulent information to insurance companies. Because of the false statements, victims may not be covered if they make a claim.
Also, fraudsters advertise their “deals” through online classified websites like Craigslist, through word-of-mouth, informal networks, or sometimes through cultural associations where they prey upon newcomers to Canada, those with language barriers or a lack of familiarity with Canada’s insurance system. Victims may not even have insurance at all, let alone be denied claims because of false information on applications.
2) Fake Pink Slips.
Fraudsters forge motor vehicle insurance liability cards (pink slips) and sell them to unsuspecting consumers through online sites like Kijiji and Craigslist. When you have a counterfeit insurance pink slip, you are actually not insured.
3) Rate Evasion.
Residents of high-risk territories deliberately register their licenses or vehicle registration addresses to lower-risk territories to get lower premiums, which costs honest consumers.
Three Ways Fraud Occurs In The Process Of Having A Loss
1) Staged Collisions.
One or multiple parties orchestrate a collision to obtain a claim payout for vehicle damage or accident benefits coverage, attempting to get cash for injuries that never occurred. Staged collisions not only drive up the premiums of honest drivers but can also endanger their well being.
2) Staged Vehicle Thefts.
Fraudsters stage the theft of their vehicles in order to get a claim payout. This costs honest customers higher premiums and ties up public resources, such as police officers, during investigations.
3) Tow Truck Operators.
Tow truck operators are often owned by or receive a fee from repair shops for referrals. Some take advantage of customers in an already stressful situation by pressuring them to have vehicles towed unnecessarily and to sign blank work orders for repairs. In some cases, they bill insurers for tows that never happened and for unneeded or unwanted storage of vehicles while waiting on repairs.
Three Ways Fraud Occurs In The Process Of Making Claims
1) Health Care Providers and Legal Representatives
People in these two professions can coach claimants to exaggerate injuries to take advantage of accident benefits for which they receive higher percentages for their services. Some have unwitting patients sign blank treatment orders that they then submit to insurers to obtain payment for services that were never provided.
Unscrupulous appraisers may work in collusion with automotive repair facilities who pay them to exaggerate vehicle damage repair estimates.
3) Automotive Repair Facilities.
Auto shops can exaggerate the damage to vehicles or even create it themselves – allowing them to pad invoices and bill for parts that were not required or used.
Between October 2016 and September 2017, Aviva Canada detected $13.7 million in fraudulent claims and $6.8 million of policy fraud.
They also reported that 27% of all policy fraud investigations were because of misrepresentation and cost $2.8 million.
In one investigation Aviva recovered $100,000 from an unlicensed intermediary related to over 50 fraudulent policies that she had set up.
What does the public think about all of this fraud?
We can conclude that this is a serious and costly crime and most certainly something needs to be done. The insurance industry is working with law enforcement and government agencies to combat fraud and educate consumers.
Part of that education is raising awareness, showing how and where this crime occurs and how much it is costing them, plus encouraging them to report any suspicions they have in order to prevent further loss.