How Fraud Affects Auto Insurance Rates for Everyone

March is Fraud Prevention Month across Canada

Insurance fraud seems, on the surface, like a crime that doesn’t hurt anyone. A few extra dollars squeezed out of an insurance company doesn’t seem like it would be a big deal. Unfortunately, when those extra dollars are taken many times over, the financial implications for insurance companies becomes a huge one indeed.

The reality is the insurance company doesn’t foot the bill for fraudulent claims on its own. The costs are dispersed amongst its auto insurance policyholders; the good drivers and the honest drivers, as well as those looking to take advantage and make a few extra dollars. Correction: it’s not just a few dollars. The Insurance Bureau of Canada (IBC) estimates that insurance fraud costs Ontario drivers $1.6 billion each year and that a single staged collision could amount to $100,000 in fraudulent payouts.

The hit to your wallet is not insignificant either. IBC says $236 of your auto insurance premium every year goes to pay for the illegal activities of fraudsters.

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Types of car insurance fraud

From inflated claims, false injury and damage claims, and of course, large insurance crime rings, auto insurance fraud comes in all shapes and sizes. Some of the most common types of auto insurance fraud to be on the lookout for include:

  • Auto repair shops that deliberately cause extra damage to a vehicle that’s been involved in a collision, so the repair bill is higher.
  • Drivers who include pre-existing damage to their claim for repairs from a legitimate insured loss.
  • Medical clinics that ask claimants to sign incomplete or blank benefit forms only to bill the insurance company for services never provided.
  • Individuals who privately sell a stolen vehicle to an unsuspecting consumer after altering the vehicle identification number (VIN).
  • Staged auto thefts where the owner drives the vehicle to a remote location or hides it. This one, in particular, has grown in popularity due to the financial stresses brought about by the COVID-19 pandemic.
  • Staged collisions where a driver intentionally causes an accident with another person (someone not in on the scam) to support fraudulent insurance claims that will follow.

Staged collisions are particularly dangerous because innocent, unsuspecting drivers are put in harm’s way.

Three types of staged collisions

Auto accidents sometimes are no accident at all. Auto insurance fraudsters looking to submit insurance claims for fake injuries and auto damage are not above staging a collision. The following are three types of staged collisions IBC highlights as being popular with fraudsters:

1. Staged Accident: The Swoop and Squat

There are a few variations on this scam, but basically, the scheme forces an innocent driver to rear-end the car ahead of them. Whether the scammer speeds up alongside an innocent driver and suddenly cuts in and brakes, or they brake out of the blue when they see you in their rear-view mirror, the result is the same - it forces a rear-end collision.

2. Staged Accident: The Drive Down

A seemingly nice gesture can turn into a nightmare for an unsuspecting driver. The fraudster signals (with a wave of the hand or a flashing of the headlights) to a driver trying to merge or change lanes, that it’s safe to proceed. Instead of giving the right-away as the fraudster indicated they would, they hit the car, denying later they ever signalled to the innocent driver. This one is popular in parking lots too, where the scammer waves a person out of a parking spot but hits them as they do so.

3. Staged Accident: The Bullet Left Turn

In the fraudster’s world, nice gestures are a means of catching you off guard. This scheme involves the fraudster giving the go-ahead to a driver - with a wave of the hand or some other gesture - to make a left turn. As the unsuspecting driver makes their turn, the other vehicle makes a sudden move forward to cause the collision. Again, it will later be denied they ever gave the go-ahead to the innocent driver to proceed.

What to do if you’re in a car accident to avoid fraud

If you have been involved in an accident, your awareness of what is going on around you is the first line of defence against a fraudulent claim. Follow these steps if you are involved in an accident:

  • After a collision, take pictures of the scene with your phone. Make a note of the positions of the cars, and any damage to the other driver’s car as well as your own.
  • Take pictures of the debris in the area and of skid marks too.
  • Make a note of the behaviour of drivers and passengers and signs of injury. Also, note how many people are in the vehicle.
  • If your vehicle requires repairs, stick to trustworthy repair shops you know; if you need a referral, your insurance company can recommend a trusted shop.
  • If anyone at the scene - the other drivers, passengers, or tow truck drivers – recommends going to a particular repair shop, be suspicious. Make sure everyone you work with in handling the accident is licensed and reputable.

Insurance fraud is not a small crime, nor it is victimless. If you are in any way suspicious of the circumstances of the collision, report it to the police.

How to report suspected insurance fraud

If you witness or have information about insurance fraud or a potential crime, you have several options available to you:

  • Report it to your local police or Crime Stoppers at 1-800-222-8477
  • Make an anonymous call to IBC to report it at 1-877-IBC-TIPS (422-8477)
  • Complete and submit the IBC’s anonymous online tip form
  • Submit a tip to your province’s insurance regulator. In Ontario, this is the Financial Services Regulatory Authority. You can submit a tip online and anonymously.