TORONTO—Believe it or not, car insurance providers also think their coverage is too expensive in the GTA, and fraud is a big part of the reason why.
According to a report by KPMG audit group, insurance companies lose anywhere from $770 million to $1.6 billion per year to organized fraud groups.
All honest Ontario policy holders are victims of this type of organized insurance fraud.
— Rick Dubin, Insurance Bureau of Canada
“Auto insurance premiums in Ontario are far too expensive and insurance premiums are driven by claims cost,” said Rick Dubin, VP of investigative services at the Insurance Bureau of Canada (IBC).
Dubin was glad to hear York Regional Police recently busted 46 suspects for car insurance fraud.
Not too long ago organized groups staged car collisions, then filed for insurance claims. But the scam has evolved far beyond that. Nowadays, police suspect that fraudsters use identity theft at rehabilitation centres and assessment centres to forge signatures of practicing nurses and make accident benefit claims.
The damage to some nine insurance companies in the most recent case came to around $5 million, incurred from paying for rehab services that were not performed.
“These rings in general are extremely sophisticated and organized,” said Dubin. “They do change their tactics over time.”
The accused have been charged with 142 accounts of fraud and conspiracy to commit an indictable offence, fraud under $5,000, fraud over $5,000, and obstructing a police officer.
The $1.6 estimate cost of false insurance claims, however, is said to be very conservative by another audit company, Ernst & Young.
The Ontario Automobile Anti-Fraud Task Force released an update in July saying there is an “unexplained gap” between the rising cost allotted for accident benefits claims and any factors that could explain that rise.
In 2010, this unexplained gap resulted in Ontario drivers paying $300 to insure a vehicle, with GTA drivers paying an extra $700.
“All honest Ontario policy holders are victims of this type of organized insurance fraud,” Dubin said.
There is also increased risk for innocent car drivers who are placed in dangerous situations.
The police are carrying out 40 ongoing investigations to track organized car insurance fraud in partnership with the insurance industry, and the number is growing, according to Dubin.
Dubin said the fraud has nothing to do with unemployment or a bad economy—it’s the rewards that attract people. “The profits are significant for organized crime and to date, the punishments have been relatively light.”
Earlier this year around 40 car insurance fraudsters were arrested under Project Whiplash. The most recent case involving the 46 arrests is dubbed Project Sideswipe.
The mass increase in rehab and assessment centres in the GTA also contributes to the increase in the number of fraudulent set-ups.
Dubin said that in order to tackle the problem, police officers are undergoing special training to help recognize staged fraud. The IBC is also educating the public by raising public awareness of car insurance fraud. Protection measures for people and insurance companies who provide information to police are also in place.
To deter car insurance fraud, Dubin said aggressive prosecution and tougher sentences are needed.
The GTA has been tagged in news reports as “the staged collision capital of Canada.” Cities in the Golden Horseshoe—Markham, Mississauga, Brampton, Toronto, and Scarborough—are hotspots for insurance fraud.
The scam originated south of the border, notes Dubin. “This developed in the United States to a very large degree before it really showed up to this extent in Canada.”
The National Insurance Crime Bureau, a non-for-profit organization operating in the U.S., confirms that individuals from bordering states imported cars into Canada and formed organized groups in the GTA.
Individuals with knowledge of car insurance fraud groups are encouraged to anonymously submit tips at www.ibc.ca or call the toll-free number: 1-877-IBC-TIPS (422-8477).
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