Friday, 16 March 2018 22:20

Fraud Investigation Signals Need For Auto Insurance Reform in Canada

Written by Robert Tuomi, The Square
Fraud Investigation Signals Need For Auto Insurance Reform in Canada Photo by Ian Shalapata


According to insurance company Aviva, Canadians are paying billions for auto insurance fraud. In its estimation, in Ontario this amounts to almost $550 million annually.

The company says it has solutions---five of them.


To find out how bad fraud is, the company conducted an investigation to determine the full extent of auto repair fraud. Aviva set out to discover what really happens when damaged vehicles are sent to auto body shops after a collision. After reviewing what it could see as fraud, it determined illegitimate repairs and practices cost Ontario motorists approximately $547 million annually.


Working behind the scenes in a year-long secret operation, Aviva’s fraud investigation team purchased 10 cars, which investigators and automotive experts deliberately crashed and damaged. These experts, retained by Aviva, carefully examined and assessed each car to calculate the actual extent and cost of repair.


Equipped with hidden cameras, the damaged cars were positioned near provincial highways at random locations in the Toronto area to simulate collisions. Undercover investigators posed as drivers were equipped with recording equipment.


They logged and tracked the entire process, from the time assistance arrived at the collision scene until their damaged cars were repaired and invoices were submitted. Evidence gathered during the investigation revealed that nine out of 10 cases involved fraud.



Substantial level of fraud: An average of 57 percent of total repair costs invoiced to Aviva were fraudulent.


Additional deliberate damage: Hidden camera footage caught auto body shop employees deliberately causing damage to cars.


Wrongful billing and repairs of car parts: Auto body shops billed for new car parts, but installed used parts, or did not replace the parts at all. Additionally, parts that were not damaged were itemized on the final invoice as repaired.


Billing for services not provided: Tow truck operators invoiced Aviva for towing and storage services that did not occur.


Consumer abuse: Tow truck operator offered incentive for tips on accidents requiring towing services, discouraged driver from using Aviva’s accredited auto body shops, towed vehicles without proper permission and asked a driver to sign a blank work order.


Aviva executive Gordon Rasbach called the situation a “national scandal. However, we recognize that not every tow truck operator or auto body shop is fraudulent.”


“As for those who are taking advantage of the system, government and the insurance industry must collectively act against auto insurance fraud by tackling the root causes that have led to a broken and dysfunctional system. The way forward begins with government. That is why we are proposing a 5-point action plan on behalf of honest consumers,” Rasbach said.


Action Plan

• Aviva’s plan starts with banning referral fees, which it says take unnecessary cash out of the system. The fees benefit third-party suppliers, but not consumers.


• Second is a prohibition on blank work orders and banning any supplier from asking consumers to sign them.


• Next, there should be discounts to customers who agree to use an insurer’s accredited repair network.


• Insurers should be forced to report all identified fraud and investigation outcomes so that data is shared.


• The final point is to increase penalties for suppliers of auto parts and related materials who abuse consumers or defraud insurers.


Rasbach concluded that honest drivers, “who may have been a victim of fraud without their knowledge, or are paying for it through higher premiums, deserve better.”


On the investigation, Aviva had all damaged vehicles assessed by an independent appraiser. Of the nine vehicles on which fraud was eventually identified, the original assessment for total damages was $27,657.15. After the shops completed work on those same nine vehicles, the total billings came to $58,328.40.


After the repairs, the insurance company’s investigators re-inspected each vehicle to assess what was actually done against what was billed. This revealed that $33,179.74 of the $58,328.40, or 57 percent of the total cost, was fraud.


This was due either to the parts and labor not being installed or completed as invoiced, or because the parts and labor were attributable to additional deliberate damage caused by the shop itself.


We thank The Square for reprint permission.