Canadian Underwriter

COVID-related fraud schemes that IBC has observed

June 2, 2020   by Greg Meckbach

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Four vehicles were reported stolen to separate insurers, from the same driveway, on the same night in Brampton, Ont. This is just one example of alleged fraud identified shortly after the onset of the COVID-19 pandemic, the Insurance Bureau of Canada reported in a paper released Tuesday.

Research shows a relationship between unemployment and increased property crime, particularly when high unemployment rates are sustained, IBC says in Insurance Fraud in Times of Crisis: COVID-19 Pandemic-Related risks in the P&C Insurance Industry. The report is intended to draw insurers’ attention to schemes discovered already and fraud schemes that criminals could be cooking up.

In addition to fake vehicle thefts, fraudulent water damage claims is one example. Unlike arson, water damage claims do not normally get investigated by police or the fire department, draw significantly less attention from witnesses, and often lack forensic specialists to determine cause and origin, IBC reported.

“The COVID-19 pandemic represents an opportunity for fraudsters to profit at the expense of insurers,” IBC warned.

With the onset of the pandemic, IBC says its Investigation Coordination and Support Service are closely monitoring the market for unusual activity or signs of emerging trends.

“As such, the pressure COVID-19 places on crime rates will heavily depend on how quickly laid-off workers are called back to work or find new employment.”

Vehicles may get reported stolen because the owner is unable to finance it. Ride-sharing operators may report their vehicles as stolen because of a significant decrease in demand for their services, said IBC. There is also heightened risk of arson, particularly of detached garages or sheds.

In the future, the economic hard times resulting from COVID-19 could lead to an increase in staged motor vehicle collisions. Claimants could cite the fear of contracting the coronavirus as the reason they failed to remain at the scene, go to the hospital, or promptly report the collision, IBC said in the paper.

There could also be an increase in reports of cargo theft, particularly of parked trailers in holding yards, because shuttered businesses are unable to accept delivery of goods.

“Experts believe that some fraudulent schemes will not materialize until June or July, at which time the fraudsters will try to make up for lost profits during the early months of the crisis with a new, sudden influx of fraudulent claims.”

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