To what degree is auto insurance fraud a peculiarly urban problem?
Insurance companies across Canada have noted that auto insurance fraud is an issue throughout Canada, costing insurers approximately $1.5 billion each year. The prime trouble areas appear to be in Ontario and B.C.
But Ontario, where auto insurance fraud is particularly acute (the province has the country's most generous auto accident benefits package), may be the best example of the urban/rural divide.
On the one hand, brokers in the Greater Toronto Area (GTA), where the bulk of the province's auto insurance premium is written, can spin many tales of auto insurance frauds they've witnessed -- such as the one about a relaxation CD that a client billed out to the insurer for more than $300.
But brokers outside the GTA – including Thunder Bay, Peterborough, Ottawa and Leamington – say they have witnessed very few instances of auto insurance fraud. This is true not only of smaller centres, but even more highly-populated urban areas such as Peterborough and Ottawa.
“I have been here for 13 years, and there was one [fraud case] that went to court, and that was it,” said Nancy Moulson of W.H. Scrivens & Son Ltd. in Ottawa, Ontario. “I was at a seminar this week, actually, where it was discussed. I would say 20 brokerages were represented, and nobody found it to be anything, really. Nothing that they’ve seemed to come across.”
Dawn Ure of Will Insurance Brokers Ltd. in Leamington, Ontario said the intimate nature of small towns meant that fraudsters had nowhere to hide.
“That’s the benefit of living rural,” said Ure. (continued)#pb#
“Everybody knows everybody, and you’re going to get caught. You just don’t have the ability to hide as you do in the metropolis. I’ve been here or here 20 years, I would see half a dozen investigations. That’s not even fraud that has been proven and charged. “
Mike Young of Youngs Insurance Ltd. in Thunder Bay said he hadn’t seen an example of auto insurance fraud during his 20-year career. “Not to my memory, no,” he said. “You go to bigger, cities, you get bigger organized crimes. Here, everybody knows each other. It’s kind of hard to pull that kind of stuff off out here.”
In Peterborough, about an hour drive northeast of Toronto, Jackie Seifried of Topping Insurance Brokers said her office has not seen a fraudulent auto insurance claim in 10 years.
“In our office, we have had no fraud since I’ve been here, touch wood,” she said. “You hear about it all of the time in the bigger cities, but we haven’t experienced it here in our office.”
Upon receiving the final report of the Ontario Auto Insurance Anti-Fraud Task Force in November 2012, Ontario's finance ministry issued a press release talking about fraud being an in issue in “Ontario.” But Ontario is a big province, and discrepancies between claims cost patterns between the GTA and other smaller communities is what led some to find patterns of fraudulent activity in the first place.
For example, the task force’s final report to the Ontario government said claims costs in the GTA are generally greater than those in rural Ontario. “So it is expected that insurance claims costs would follow that trend and that there would be a cost differences between regions,” the report said. “However, the gap between the GTA and the rest of Ontario has been growing dramatically in recent years, and…the extent of the gap is not readily explained by available data, such as growth in cost differences.”
For example, accident benefits in the GTA increased by more than $1.9 billion between 2006 and 2010, as opposed to an expected increase of $236 million based on health care expenditures. In rural Ontario, accident benefits costs increased to $158 million, compared to an expected cost of $106 million.
