Car insurance fraud costs everyone
If you’re one of the many drivers who believes car insurance rates are too high, you might be surprised to know just how much of your premium goes toward covering the cost of fraudulent automotive claims.
According to a recent article written by Will Koblensky for Ratehub.ca, car insurance fraud is a $2 billion per year problem in Canada, but nowhere is it more of a problem than right here in Ontario. On average, it costs Canadian drivers about $125 per year on their insurance to combat car insurance fraud. In Ontario, drivers pay an average of $236 annually to cover the cost of insurance fraud.
While you may think the problem stems from drivers making false claims, there are actually several ways fraud is perpetrated that have nothing to do with regular drivers.
Fake auto insurance fraud
In these cases, someone impersonating an insurance broker advertises and offers to find you a lower rate than what you’re currently paying, for a fee. But Insurance brokers like DPM Insurance Group never take fees from consumers because the insurance company pays them a commission. In this scam, 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 phony insurance broker provided false information.
Similarly, sometimes a fake company offers a very low premium, but never actually sets up any coverage after you pay. Even though you, the driver thought you were insured, you’re now actually driving without any insurance at all.
2. Staged 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: One practice is so common, the Insurance Bureau of Canada has a special name for it – the “Swoop and Squat”. This scam involves two conspiring vehicles and one innocent vehicle. One fraudster changes 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. The 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’s actually fraud. 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.
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
- 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.
How to report car insurance frauds
If 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.
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 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 physiotherapy, housekeeping, care-giving 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.
Source: Will Koblensky for Ratebhub