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• Give Me the Stats
• What is Insurance Fraud?
• Examples of Insurance Fraud

Give Me the Stats

The numbers are staggering. According to the Canadian Coalition Against Insurance Fraud (CCAIF), general insurance fraud costs Canadian insurers $1.3 Billion (CDN) each year. Keep in mind that this figure only covers general insurance fraud and doesn't even include the various other types of insurance fraud that exist.

In the U.S., the situation is even worse. The National Insurance Crime Bureau estimates that property and casualty insurers pay more than $30 billion a year in bogus claims.

Put another way, a full 10% to 15% of insurance premiums for home, car and business insurance go to pay for false or exaggerated claims (insurance fraud). Auto theft accounts for an additional $43 of the average auto insurance premium.

What is Insurance Fraud?

Insurance fraud is defined as any act or omission with a view to illegally obtaining an insurance benefit, according to the CCAIF. Insurance fraud can happen by exaggerating losses, falsifying information or fabricating fraudulent activities or scenarios.

People often view insurance fraud as a victimless crime. In fact, honest policyholders often end up being victimized. Most insurance companies base their rates on the cost of doing business. When costs go up because of fraudulent claims, other customers end up paying the price. People need to be aware of fraud and be willing to report it when they suspect it.

Examples of Insurance Fraud

Although it is often difficult to catch offenders, some people make it very easy for Insurance companies to figure out what's really going on.

One fairly common type of fraud people attempt to commit occurs when people attempt to buy insurance coverage after their vehicle has already been damaged.

In one example, a motorcyclist wiped out and, while lying on the side of the road with a ruptured spleen, had the presence of mind to call an Insurance company to buy coverage. What he didn't know was that a witness who saw the accident also heard him make the call.

Insurance fraud can also have dire, unintended consequences. Some abusers figure that the easiest and quickest way to collect insurance money is to destroy their car. Often, this is accomplished by setting the vehicle on fire. As you can imagine, this can have lethal consequences, as in the following example.

In the U.S., two brothers were hired to commit insurance fraud by setting a car on fire. They doused it with gasoline, and to make sure the vehicle would be completely destroyed, they decided to throw in a pipe bomb. The bomb exploded, setting one of the men on fire. He was likely killed instantly from the explosion, but his brother, not realizing that, rushed to extinguish the flames and ended up catching on fire. He ran toward a nearby highway for help and flagged down a state trooper who had come to investigate the black cloud of smoke. The man told the trooper what he and his brother had done and then, like his brother, passed away from his injuries.

Insurance fraud is not limited to total write-offs either. In fact, a large portion of fraudulent claims occur in cases where people attempt to obtain coverage for parts of their vehicle. Insurers aren't easily convinced of these types of claims, but that doesn't stop 'creative' people such as our next example.

An insurance customer said some parts were stolen from his car, and to support his claim, he submitted what appeared to be phony invoices along with Polaroid photos. At first glance, the photos looked pretty good, but something seemed a little odd about them. On closer inspection, investigators realized that the man had taken extreme close-ups of a toy car that was the same color and make of his actual car. The customer eventually admitted he took photos of the toy car in an attempt to get his claim paid.

With most coverage, your insurance covers more than simply the metal that constitutes your vehicle. Personal injury claims are a major source of insurance fraud, and it's not just the customers who attempt to cash-in on these claims.

In one particular case, a passenger riding in a customer's car was injured in a crash and required chiropractic treatment. Of course, the customer's insurance covered the treatment as prescribed. However, sometime before completing the prescribed series of doctor visits, the passenger died of unrelated, natural causes. Now, you'd think that a person who is deceased would no longer benefit from a doctor's care, but evidently, the chiropractor thought otherwise. He continued to bill for treatment for a full month after the patient's death.

Finally, no interesting set of examples is complete without a story that makes your head spin. While no rational person would engage in such activities, some people evidently go to great lengths to commit these fraudulent crimes.

A woman decided to take her boyfriend's motorcycle for a ride. Unfortunately, she didn't know how to drive and crashed it. Luckily, she wasn't injured, despite the fact that the motorcycle was quite ruined. However, the boyfriend wasn't satisfied with this outcome and, afraid that his insurance wouldn't cover the damage to his motorcycle because his girlfriend wasn't listed as a driver on his policy, decided to pretend that he had crashed the motorcycle. He figured he needed some injuries to make his story credible, so he tied himself to the back of a truck and asked a friend to drag him around a little bit to produce the road rash he would have gotten from the wreck. Well, he got the injuries he wanted, but they didn't do him any good. His girlfriend told investigators that in fact it was she who crashed the motorcycle.

It is important to keep in mind that, despite the sheer folly of some of these incidents, insurance fraud can be and often is, a dangerous activity. It costs all policyholders real money each year and affects everyone that has insurance. While Insurance companies such as CAA do their best to prevent fraud, all companies also rely on the public to provide them with information to help distinguish fraudulent claims from those that are legitimate.

If you know of someone you has committed (or is attempting to commit) insurance fraud, call the Insurance Bureau of Canada's confidential tip line at 1-877-IBC-TIPS (1-877-422-8477) or click here to submit an anonymous tip online.