How Fraud Affects Auto Insurance Rates for Everyone

A couple sitting on a couch reviewing their auto insurance renewal paperwork.

Insurance fraud is a serious problem that doesn’t only impact those who are victims of it – it affects every Canadian driver through escalating car insurance rates.

According to the Insurance Bureau of Canada (IBC), fraud costs Ontario drivers an estimated $1.6 billion each year. That means $236 of a driver's auto insurance premium pays for the illegal activities of fraudsters.

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 make much of an impact on a large and successful company. Unfortunately, when those extra dollars are taken illegally many times over, the financial implications for insurance companies become a huge one indeed.

The losses insurance companies suffer due to fraud results in higher insurance rates across the board. That means the more fraud occurs; the more everyone winds up paying for insurance policies since the cost to the insurance company is passed on to the insured, even though they likely had nothing to do with the crime.

How to Identify Car Insurance Fraud

Insurance fraud from inflated claims, false injury and damage claims, and of course, large insurance crime rings adds up quickly .

According to the Insurance Institute of Canada, the most common types of insurance fraud includes:

  • Auto repair shops that intentionally cause additional damage to a vehicle that was involved in an accident or bill several different insurers for repairing the same prior damage to a vehicle.
  • Medical clinics that ask claimants to sign blank accident benefit forms, then bill insurers for services never provided without the claimants’ knowledge.
  • Individuals who privately sell a stolen vehicle to an unsuspecting consumer after changing the vehicle identification number (VIN) to mask its identity.
  • Collisions where a driver intentionally causes a collision with an unsuspecting driver.
  • Medical clinics that forge the signatures of medical practitioners and use their names and college registration numbers without their knowledge or consent on accident benefit forms. The clinics then bill insurers for services that were not provided.
  • Staged auto thefts where the owner drives the vehicle to a remote location or hides it.

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How to Avoid Being a Victim of Insurance Fraud

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 witness or have information about insurance fraud or a potential crime, IBC recommends you take the following action:

  • 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

You can also report car insurance fraud to The Canadian Anti-Fraud Centre at 1-888-495-8501.

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.

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. Inflated insurance claims, in which drivers attempt to get previous damage to the vehicle repaired under the claim, are one of the many ways in which fraud can occur. 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 that is not likely to have been caused by the accident.
  • Make a 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.
  • If your vehicle requires repairs, stick to trustworthy repair shops; 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. Every Canadian driver can help keep car insurance rates low by avoiding insurance fraud and reporting it when necessary.