An undercover investigation by Aviva Canada has lifted the hood on auto insurance fraud perpetuated by towing companies and auto repair shops.
The insurer purchased 10 cars last year that were intentionally damaged and evaluated by experts that determined the actual repair costs before the vehicles were planted on roadsides.
Hidden cameras installed in the cars caught body shop employees causing more damage to the vehicles, and evidence revealed that about 57% of total repair costs invoiced to Aviva were fraudulent. At the investigation’s conclusion, nine of the 10 cases involved fraud.
Other sins committed included body shops billing for new car parts, but installing used parts or no parts at all, billing by tow truck operators for services that didn’t take place, and those same operators discouraging consumers from using auto body shops accredited by Aviva.
The year-long operation addressed a problem that many predict has been going on for a long time.
“The amount of consumer abuse and misrepresentation to the consumer that they face when they get in these accidents – both at the roadside with the towing and at the body shop – those things have been around for years and have never been addressed by government,” said Gordon Rasbach, Aviva Canada’s vice president of fraud management.
The investigation was driven by the need to quantify the extent of fraud in the sector, Rasbach explained. Instead of just assuming that fraud was going on, Aviva wanted to ‘take the temperature’ of the problem using more scientific methods.
Lack of collaboration among insurers was a missing piece in solving the problem of large-scale fraud. Accordingly, the outcome of Aviva’s investigation is a five-point action plan that calls on provincial regulators to make industry-wide changes.
“It’s reached the point in this sector where you can’t rely on the insurers getting together to try and voluntarily solve the problem themselves,” said Rasbach. Aviva recommends that the government comes in to mandate that insurers work together to report fraud, investigate fraud, and share data collected from investigations.
Among the other points of action – banning referral fees, prohibiting blank work orders, increasing penalties – Rasbach recommends customers only use accredited auto body shops. After all, the one damaged car out of 10 that didn’t instigate fraud was fixed at an Aviva accredited shop.
Offering discounts to customers who choose the more legitimate route of repair is an incentive insurers should be able to use.
“Aviva wants the government, the insurance regulator, to authorize allowing customers discounts if they promise that, if their car gets damaged in a collision, they’ll take it to an accredited shop,” said Rasbach, “because we know the costs will be far less, so then that discount is passed along to the consumer.”
