How Does Fraud Affect Your Home and Auto Insurance Premium?
If you have noticed your home and auto insurance premiums going steadily up year-over-year, one big reason is likely fraud.
You might be surprised to know that each year insurance fraud costs Canadians a staggering $1 billion. At least 15% of what you currently pay for insurance in this country goes towards covering fraudulent insurance claims. That means even if you are doing everything by the book, you are still paying heavily for the fraudulent activities of others.
Now, throw in the fact that we are all still deep in the throes of the COVID-19 pandemic, which has left many of us scrambling to cope with unfamiliar work situations and feeling the pinch of economic hardship and uncertainty. All these factors are making us even more vulnerable.
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Fraud and Economic Downturns Go Hand-in-Hand
Historically, there are almost always surges of fraudulent activity in times of economic adversity and natural disasters – both of which we are seeing with this pandemic. Fraudsters typically jump at any chance to profit from fear and uncertainty and have already begun exploiting the current crisis for their financial gain.
What makes the COVID-19 pandemic different from past crises is that it crosses all lines of insurance, including home, auto, and commercial. We are all struggling to adapt to a new reality. Unfortunately, this added distraction we are experiencing may decrease our vigilance and open the doors for fraudsters to take advantage. The research also shows a consistent relationship between unemployment and increased property crime, as people out of work become more desperate to find ways to make ends meet.
Would You Recognize Fraud If You Experienced It?
So how do you avoid falling victim to insurance fraud? Arguably the best way of protecting yourself is to know how to spot fraud. Learning how to recognize fraud’s red flags can save you time, money, and a whole lot of hassle.
Insurance fraud can happen in many ways, but the main types the average person should be on the lookout for are through seemingly normal activities around their cars and homes. Let’s look at some of the common ways in which fraud can take place right under our noses. Fraud usually comes in one of two forms:
- Opportunistic. When there is a legitimate claim, but damage is exaggerated, or the value of lost or damaged items is inflated to increase the payout. People may see an opportunity to “put a silver lining” on their misfortune, or have others, (such as their mechanic, for example) encourage them to do so.
- Premeditated. This type involves individuals who set out and purposefully plan ways to commit fraud, by intentionally damaging property or vehicles, falsifying work that needs to be done to your home or vehicle or make claims on property that were never stolen or damaged in the first place. These fraudsters can lurk within the service provider industry, in the form of body shop repair places or contractors renovating your home. Beware of the blank form. If someone wants you to sign a claim form and say they will “fill in the rest later”, don’t do it!
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Common Auto Insurance Fraud Scenarios
- Pre-existing vehicle damage that is included in an auto insurance claim
- Additional damage that is inflicted to the vehicle after a collision happens to increase the cost of the repairs (this could be done by service providers, such as mechanics or even tow-truck drivers, unbeknownst to the car owner)
- Service providers taking advantage of COVID-19 to charge for “extra cleaning” of vehicles (when no additional service is rendered)
- Misrepresenting the condition, mileage, or value of installed components of a car that has been stolen, or falsifying or resetting gauges in the car
- Making a claim for vehicles or property that was not stolen or damaged
- Fraudsters intentionally causing a vehicle collision with unsuspecting drivers or staging a collision with other conspirators
- Devising ways to avoid paying insurance premiums, including reporting residency at one address when living at another, misrepresenting primary drivers, not reporting using the vehicle for business use, etc.
Renovating Your Home? Don’t Pay Upfront!
Thanks, in part, to the popularity of do-it-yourself shows, home renovation is now big business. And with any big business comes a greater potential for fraud. According to the Canadian Home Builders' Association, some tips to prevent fraud include:
- Get everything in writing
- Hire professional contractors and check their references, and their insurance coverage
- Don't pay cash and don’t pay upfront
- Watch out for extra work that was not included in the original scope and price
- Make sure necessary permits were acquired
- Beware of too many "unforeseen problems" that arise
A Word About Identity Theft
With so many of us working from home, cyber-attacks like phishing and other internet hacking strategies to collect your personal information have increased. People often don’t have the same level of security as they do at the office. Therein lies a greater opportunity for fraudsters to steal your identity and credit information and use it to commit fraud. Other ways can be much more low-tech, such as credit card receipts being scavenged from your recycling bin.
Here's how to protect yourself at home and when out:
- Lock up documents (such as passport and banking information) in your home or at a secure off-site location, such as a safe-deposit box
- Shred private documents before recycling them
- Avoid opening suspicious emails and attachments
- Install security software such as an antivirus and firewall
- Never give out personal information to someone who calls you claiming to be from the government or credit card company
- Protect your PIN when using an ATM or debit machine
Your vehicle can also be a conduit for identity theft. For example, if your car is broken into and identification documents from your glovebox are stolen, or if fraudsters get a glimpse of. your identification through the windows.
Here are ways you can secure your car:
- When parked, roll up the windows, lock the doors and keep the keys with you
- Keep registration and proof of insurance with you at all times (not in the glovebox)
- Never leave envelopes or packages with identifying information such as your address in full view – put them in the trunk
- Try to always park in well-lit areas
- Be aware of suspicious people or vehicles, and report them to police if necessary
- Lastly, (and this might be a hard one for many people), know the location of all sets of your car keys at all times
Always Report Suspected Acts of Fraud
If you suspect you may be the victim of fraud, report it immediately to your local police, Crime Stoppers, the Insurance Bureau of Canada or the Canadian Anti-Fraud Centre.