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How Insurance Companies Spot Insurance Fraud

It is no brainer to claim that spotting car insurance fraud is one of the most important jobs undertaken by auto insurance companies. In a market flocked by false insurance claims, vigilance on the part of insurance companies is of utmost importance.   Insurance crime costs Canadians more than $3 billion a year and these claims have often resulted in an increase in insurance costs for the otherwise the honest customer. Customers are also susceptible to fraudulent acts in form of insurance agent scams or even fake auto insurance quotes online. In order to protect themselves and the innocent customers, insurance companies in Canada have devised modest ways to help spot fraudulent activities. They include:

a)      Analyze a claims history  

Insurance companies always make it their responsibility to analyze a customer's claims history before insuring them. For example, a customer who in the past has submitted lots of claims is always seen as a malicious one. It raises the red flag meaning that every time they submit a subsequent claim, the claim is subjected to a thorough scrutiny by the insurer.

Part of the analysis will also involve establishing the patterns, the type and frequency of occurrence. The scrutiny is of much importance as it helps interpret data and assist in figuring out the validity of your claim.

b)      Suspicious loss indicators

In the midst of all the false insurance claims, the Insurance Bureau of Canada established a list of 23 items that act as 'suspicious loss indicators'. The items act as the red flag for a fake claim. As for the case of car insurance, you do not even have to compare car insurance covers because these 'suspicious loss indicators' cut across all companies. The best thing about the items on the 23 item list is that claimants are completely in the dark in relation to its composition. This makes it easier for insurance companies to detect any suspicion. Some of the indicators insurance agents look out for include;

  • Submitting handwritten receipts for repairs on the insured item
  • Increasing auto insurance coverage prior to submitting a claim
  • Maintaining your calm even after submitting a large claim

c)       Acquiring the services of a private investigator

Just like in the movies, insurance companies are seeking the services of private investigators to assist in determining the validity of a customer's claim. Say, you submit a claim for a personal liability suffered during an accident. The work of the private investigator will be to make contact with your family, friends and any other person deemed important and can help keep an eye on your activities.

d)      Whistle-Blowers 

Reports from third parties can be of industrious help when it comes to revealing fraudulent insurance claims. These whistle-blowers make anonymous calls to inform the insurance companies of any suspicious behaviour. In return, legal protection against any sort of retaliation is granted to them. They earn in such a way that if the fraud is indeed perpetrated, the whistle-blower earns a portion of the total amount recovered.

From the IBC Website - Insurance crime: Recognize it. Report it.

It is a crime to:

  • Include pre-collision damage in an auto insurance claim.
  • Claim property items not stolen or damaged during a break-in.
  • Exaggerate injuries following a collision in order to collect benefits.
  • Make an insurance claim for an event that never happened (collision, break-in, etc.).
  • Offer or accept “free” treatment for an injury unrelated to a collision.
  • Charge an insurance company for treatments that never happened (through a health care facility).
  • Encourage anyone to participate in fraudulent activity (through a legal representative).