.JPG)
Economical Insurance is cautioning consumers who are looking to buy a used automobile to be aware that vehicles deemed a total loss from the flooding in Alberta will find their way to market for unsuspecting buyers outside Alberta.
The same potential for fraud drew a similar warning from insurers after Hurricane Sandy flooding ruined cars on the eastern seaboard. Hurricane Sandy soaked approximately 250,000 cars in the United States, and insurers issued notices in Canada to be on the lookout for total write-offs that had been sold north of the border.
“History has shown that unscrupulous people buy flood-damaged cars, clean them up and sell them at attractive, below-market prices,” Economical said in a statement on June 28. “This is not illegal. What is illegal is hiding the truth of a vehicle’s history.”
What happened in Hurricane Sandy also happened after floods in Quebec and New Brunswick, the IBC said in a statement after Hurricane Sandy.
“In each disaster, there are attempts by fraudsters to clean up and resell flood-damages vehicles," said Rick Dubin, vice president of investigative services at the
Insurance Bureau of Canada (IBC). “It is something everyone should be aware of at all times, especially after major catastrophic events where fraudsters are looking for opportunities to take advantage of Canadians.”
Brokers have been in the front lines of an effort to help curb auto insurance fraud in Ontario.
They have been working closely with insurers to identify ‘red flags’ that will help consumers identify fraud.
The issue of hiding re-sold flooded vehicles came to light in the United States, when refurbished vehicles damaged in the wake of Sandy in New York and New Jersey on the East Coast were showing up in seemingly repaired condition on the U.S. West Coast, in Washington state.
“Don't be fooled by shiny paint and a ‘new car’ smell,” said Robert W.G. Andrew, CEO of the Better Business Bureau serving Alaska, Oregon and Western Washington. “Unscrupulous sellers will use every trick in the book to clean up and sell totaled vehicles. If buyers aren't careful, the cars they end up with could be loaded with hidden and serious problems.”
Flood damaged cars may look normal, but almost always have serious problems including chronic mildew and corroded wires that lead to electrical failure. A buyer of a flood-damaged vehicle will find that it will likely require significant and expensive electrical and mechanical repairs which may only become apparent six to 12 months after purchase.
One clue for identifying a re-sold, flood-damaged car is this: on what date was the car registered in the same province in which the buyer lives?
“For example, if an Ontario resident is looking to buy a car and notices that it was only recently registered in the province, you need to ask yourself: ‘Where did this vehicle come from?’ and ‘What happened to the vehicle before it was registered in Ontario?’” said said Rocco Neglia, Economical’s vice-president of claims.
Dubin said those contemplating a private purchase should consider doing a history search of the vehicle, and have the vehicle fully inspected by a known mechanic to ensure it is not a storm-damaged or stolen vehicle.
Consumers can also go to the National Insurance Crime Bureau (NICB)'s web site and run the Vehicle Identification Number (VIN) through NICB's VIN search to see if it comes up as a branded vehicle.
