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How Fraud Affects Insurance Rates for Everyone

March 5, 2013

You might not think insurance fraud is something you need to worry about if you’ve never encountered it directly. Unfortunately, insurance fraud is a serious problem that doesn’t only impact those who are victims of it – nor does it only affect the insurance company. Insurance fraud is far from a victimless crime. It affects every Canadian driver by raising insurance rates for everyone.

The High Cost of Fraud

Insurance fraud seems on the surface like a crime that doesn’t really hurt anyone. A few extra dollars squeezed out of an insurance company doesn’t seem like it would make much of an impact on a large and successful company. Unfortunately, when those extra dollars are taken illegally many times over, the financial impact on insurance companies becomes a very large one indeed. The Insurance Bureau of Canada estimates the yearly cost of insurance crimes to be in the billions.

The loss to insurance companies due to fraud results in the need to raise insurance rates across the board. That means that the more fraud that occurs, the more everyone winds up paying for his or her insurance policies. The cost to the insurance company is passed on to the insured, even though they likely had nothing to do with the crime.

Insurance fraud from inflated claims, false injury and damage claims, and of course large insurance crime rings adds up quickly to an amount of money that insurance companies can’t simply absorb. Instead, everyone pays the price.

The Direct Effect on Rates

Car Insurance fraud can also cost you a lot closer to home and more directly if you are a victim without realizing it. It’s more common than people think and not always easy to spot.

If you have been involved in an accident, your awareness of what is going on around you is the first line of defense against a fraudulent claim. Inflated insurance claims in which drivers attempt to get previous damage to the vehicle repaired under the claim for an accident are one of the many ways in which fraud can occur.

After an accident, take pictures of the scene with your phone or a disposable camera kept in the car. Make a note of the positions of the cars, and any damage to the other driver’s car that is not likely to have been caused by the accident. Make note of the behaviour of drivers and passengers and signs of injury. Get the police involved when required by law, but also if you feel another driver is behaving suspiciously. The police can record details of the accident that may prevent fraud from succeeding.

Good records taken at the scene can help keep you from being found at fault if you are not and can also prevent the other driver from inflating their claim against your insurance company, causing further rate increases down the line.

We Are All the Victims

While insurance fraud hurts insurance companies, in the end the true victims of this type of crime are the Canadian drivers who wind up paying more for their insurance as a result. Don’t let anyone talk you into filing a fraudulent claim; it doesn’t only hurt the insurance company – it hurts everyone.

The best way to keep insurance rates from rising as a result of fraud is to be aware of it. Report any fraudulent activity and don’t allow yourself to become involved in such activity. Knowing the signs can keep you from being accidentally drawn into fraud.

Stick to trustworthy repair shops for insurance claim repairs; your insurance company can recommend a trusted shop. If the other driver involved in an accident suggests any activity that is meant to be hidden from the insurance company, such as having a friend or family member’s shop do repairs for less and keeping the extra cash, report it to your insurance company immediately. Make sure everyone involved in handling the accident, from tow trucks to repairs, is licensed and reputable.

Insurance fraud is not a small crime, nor it is victimless. The common attitude that insurance companies can absorb the loss leads to large financial losses that affect everyone’s insurance rates. Every Canadian driver can help to keep insurance rates lower by avoiding insurance fraud and reporting it when necessary.

  • anoynamas

    These insurance frauds comes from their own departments i.e claim, admin. etc. They promote it and they make money from there

  • Alex

    “licensed and reputable” shop have top prices which sometimes do not reflect quality of service!) I’m interesting why insurance companies recommend them? Good question, right? And often friend or family member’s shops do their job perfect and cheaper.

  • Alex

    “licensed and reputable” shop have top prices which sometimes do not reflect quality of service!) I’m interesting why insurance companies recommend them? Good question, right? And often friend or family member’s shops do their job perfect and cheaper.