The act of providing false information or arranging a collision in order to receive insurance claims is known as auto insurance fraud. Sometimes everyone involved in the fraud is aware of it and complicit in it, but other times the fraudsters prey on unwitting innocent pedestrians or drivers and use them as unintended victims.
The perpetrators of these fraud instances frequently use the argument that insurance fraud is a victimless crime to defend their acts. That is not the situation.
A collision is a tense situation. Your safety is jeopardized, and on top of that, you’re inconvenienced (since you were driving, you had somewhere to be) and stuck with the burdensome process of getting your car fixed or replaced.
Additionally, even if you were an innocent victim of insurance fraud, any motor vehicle collision might have an ongoing impact on your insurance costs.
The high cost of insurance fraud for insurance companies is ultimately passed on to the consumer in the form of higher rates.
Insurance rates will rise when there is more insurance fraud.
This implies that insurance fraud has a detrimental influence on every vehicle owner who carries an auto insurance policy.
Examples of car insurance fraud
There are many types of auto insurance fraud.
Here are some of the more common scams that involve intentionally causing collisions:
- Intentional target: In this scenario, the fraudster selects a car and an unwary driver and purposefully collides with them to produce damage that will need an insurance reimbursement.
- Stopping short: Similar to the intended target, this occurs when a fraudster purposefully slams on the brakes while a car is closely following them, leading the unwary driver to rear-end the car and inflict damage.
- Wave them in: In this scenario, a con artist will wait in their car, typically at the entrance or exit of a parking lot, and pretend to wave and welcome another driver to pass them in the road. The waver deliberately drives into the car when the unaware driver moves forward to overtake them, making the collision seem to be the reckless driver’s fault.
Other forms of auto insurance fraud include:
- Presenting fake documentation when asked for proof of insurance after a crash
- Reporting repair costs to the insurance company that are higher than the actual cost of repair
- Claiming to have injuries caused by the collision that are either fabricated or exaggerated
- Falsely claiming that items were stolen from the vehicle
- Staging an auto theft or hiring someone to steal a vehicle so the owner can receive a payout to replace the vehicle
What is the punishment for car insurance fraud in Canada?
Fraud against auto insurance is a serious offense with serious repercussions.
The insurer will most likely refuse to pay the claim and terminate the policy if someone is found to have filed a false car insurance claim. The driver might also be labeled as a high-risk driver as a result of this, in which case they would need high-risk auto insurance. All drivers must have insurance, and it won’t be simple or inexpensive to acquire a new coverage if your previous one was cancelled due to fraud.
The insurer may also bring a claim for damages against the fraudster, which may include costs incurred in the form of money paid (plus interest), court costs, or labor expended on the investigation.
The fraudster can possibly receive jail time or severe monetary fines. If found guilty of motor insurance fraud in Ontario, the maximum sentence is 14 years in jail.
How to avoid insurance fraud in Canada
Many people involved in insurance fraud had no intention of breaking the law. That’s why it’s so important to be diligent with your observations and documentation any time you are involved in a situation where your vehicle is damaged.
If you are in a motor vehicle collision, no matter how small, and something doesn’t feel right, it’s important not to ignore your instincts.
Be sure to keep detailed records of the event. Take photos of the vehicle, the other driver’s license plate, driver’s license, and insurance documents, and do not sign any documents or agree to any terms at the scene of the accident.
When your vehicle is repaired, carefully review the invoice from the body shop and flag anything that doesn’t look right. Contact your insurance provider with any questions or concerns.
Insurance company fraud in Canada
Aside from facing fraudulent claims, it’s also important to be aware of illegitimate insurance providers in Canada. To protect yourself as a customer, you can also take measures during the purchasing process, such as:
- Selecting an insurance agent or insurance company that is appropriately licensed
- Asking questions to your insurance representative for clarity
- Double-checking the validity of your insurer by giving them a call
- Avoiding the purchase of insurance involving cash, money transfers, strange emails, or inconsistent documents
FSRA has put together an auto insurance fraud prevention checklist, so be sure to follow along in order to reduce your overall risk.
The bottom line
A serious issue, insurance fraud can entice unwitting participants who are fully ignorant they are taking part in criminal activity.
Learning about the prevalent scams out there is one of the best methods to prevent being an unwilling participant in vehicle insurance fraud.
Unfortunately, new scams emerge frequently, so if you’re ever in a collision, be sure to follow all the advice we’ve provided to prevent getting involved in insurance fraud.