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The Basics of Car Insurance Fraud

Auto Insurance

By Smart Bug | March 14, 2016

Car insurance fraud costs everyone. As the amount of fraud increases so does the cost passed on to consumers. Here are some frequently asked questions about insurance fraud how to protect yourself against this criminal activity.

What is Insurance Fraud?

Insurance fraud happens when someone intentionally deceives an insurance company for financial gain. This can be done by the insured or another party such as a repair shop or medical office. Sometimes the insured is “in” on it and other times they are just as much a victim.    Car insurance fraud is particularly common – as you can see in the video above there are many “opportunities” for fraudulent activities.

What should we look out for?

The Insurance Bureau of Canada divides fraud cases into two categories: opportunistic fraud and pre-meditated fraud.

Opportunistic fraud includes misrepresenting the scenario and exaggerating damage or injuries. This includes:

  • Misrepresenting the facts regarding the damage that caused the need for a claim to be filed
  • Making a claim for property or damage that was not stolen or did not occur as a covered incident
  • Accepting treatment for an injury that is not medically necessary or unrelated to a vehicle collision
  • Exaggeration of injury or recovery time particularly to collect benefits
  • Inflicting additional damage to a vehicle to increase the cost of repairs
  • Encouraging others to participate in any of the above fraudulent actions

Pre-meditated insurance fraud is a deliberate action to defraud an insurer where no real event occurred.

  • Filing a claim for an event that never happened.
  • Staging a collision or intentionally causing a vehicle collision.
  • Intentionally damaging your vehicle (or having someone else damage it) in order to file a claim.
  • Falsely reporting items or a vehicle as damaged or stolen.
  • Purposefully avoiding paying your insurance premiums.
  • Charging for services never provided (such as towing repairs and medical services).

As you can see the above forms of fraud can be perpetrated by the insured as well as others involved throughout the claims process such as tow truck drivers repair shops and medical offices.

How to Prevent Insurance Fraud

Preventing fraud is not always easy. But here are a few ways you can protect yourself from becoming a victim:

  • Purchase a dashboard camera to record any potential accidents. It’s a fantastic way to protect yourself against false accusations and accurately record what happened.
  • Document. Take pictures and video of any damage to your car keep receipts and any paper or electronic communications you receive. Keep multiple physical and electronic copies.
  • Always get the other driver’s insurance license plate and contact information if you’re in a car accident. While calling the police is only mandatory if there are injuries or the estimated damage is above $2000 it may be a good idea.
  • Trust your instincts. If it feels off it probably is.
  • Use trusted professionals with a strong community reputation.
  • Talk to your broker. They’re there to help you navigate your claim.
  • Don’t participate in insurance fraud.

Report Suspicious Activity

What should you do if you know someone is committing insurance fraud?  The Insurance Bureau of Canada has established a dedicated fraud prevention line that is ready to provide assistance. Call 1-877-IBC-TIPS to report fraud.

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