Canadian Underwriter

Delving Deeper

March 1, 2016   by Debbra Macdonald, President; and Jason Mandlowitz,Chief Executive Officer and Vice President, Administration, 3C Investigations Inc./ International Multi-Cultural Background Information Services

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With the growing number of people new to Canada, or those who are personally and/or professionally linked to other countries, the property and casualty industry in Canada potentially faces yet another challenge in obtaining credible information to ensure the legitimacy of claims initiated by individuals and in safeguarding against organized crime and fraud.

Debbra Macdonald President, 3C Investigations Inc./ International Multi-Cultural Background Information Services

Debbra Macdonald
3C Investigations Inc./ International Multi-Cultural Background Information Services

The insurance industry is not alone, of course; employers and corporations are facing the same challenges in their hiring practices, while legal services firms and law enforcement agencies are being confronted with identifying and addressing fraudulent activity.


It is not uncommon for these groups to undertake research into the background of claimants and to construct a “scope of activity” analysis to determine broader trends and developments.

However, this activity has proven to be limited, given that it focuses on easily and readily available sources of information, including standard social media and open sources.

Fraud has no borders, especially through social media in the World Wide Web. It has become extremely important to take a competitive approach to combating fraud by eliminating language and cultural barriers through translation of blogs, social media and other forms of online communication.

The issues that adjusters and investigators face include not knowing the proper websites to search to identify postings of the target or its group. For example, one of the most popular sites for social media in Europe is VKontakte, which has capability of content in several languages.

It would be more difficult and costly for an outsider to find the information where cultural barriers are present. A person who speaks the language can access the information with ease.

Furthermore, finding the connections and social activities online and through media may allow adjusters to make informed decisions and mitigate the claim appropriately.

Insurance companies, insurance advocacy organizations, think tanks, governments and consumers all know there is some fraud involved in claiming benefits from insurance or government programs. The extent of the fraud is difficult to quantify, but it has reached billions of dollars in Canada, as reported by organizations such as KPMG Forensic and Insurance Bureau of Canada.

In addition, Statistics Canada has reported individuals other than employees committed most frauds against business establishments in the country in 2008. Stats-Can figures show that for health and property insurance establishments, 45% of respondents cited there was fraud.

In a 2001 study prepared by the Canadian Coalition Against Insurance Fraud, the group determined that general insurance fraud costs Canadian insurers $1.3 billion each year. Property and casualty insurers paid $500 million for personal injury insurance claims that contained some form of fraud.

Based on a review of 4,066 closed-with-payment claims in the Atlantic provinces, Ontario, Manitoba, Saskatchewan and Alberta, the study found at least 26% of all personal injury claims that were examined contained elements of fraud. Opportunistic fraud (exaggerating the extent of an otherwise legitimate injury for financial gain) exceeded premeditated fraud (for example, a staged accident or deliberately caused accident).

The cost of fraudulent claims at the time was found to be highest in Ontario, at 21% to 31%, and lowest in Alberta, at 7% to 12%.

The 2012 report of the Ontario Automobile Insurance Anti-Fraud Task Force notes that automobile fraud in Ontario is between $769 million and $1.56 billion annually. Of this amount, opportunistic fraud accounts for $593 million to $1.285 billion and organized fraud costs $175 million to $275 million.

The IBC-commissioned report by KPMG Forensic found that although the study could not provide the precise costs of auto insurance fraud in Ontario, it did suggest 9% to 18% of annual claims costs are fraud-related.

Using the $769 million to $1.56 billion estimate, KPMG calculated that the impact of fraud on the average auto insurance premium in Ontario would be between $116 and $236.

These trends are unsustainable and make it very difficult for participants in the insurance marketplace to control or lower consumer costs.


There are a number of issues of concern evident in current fraud programs.

One is the insurance industry’s fraud detection paradigm has not evolved quickly enough to counter the escalation and scope of fraud. The scope of fraud is changing through communication online and organized efforts to commit fraud, fraud efforts have no borders, and communication has become easier with the flow of information through the Internet.

Claims adjusters and special investigators are generalists. While they may have access to internal and external resources, language barriers may exist and search terms may be different as a result of cultural barriers. Much time can be wasted if search criteria is incorrect.

For example, a search of Facebook may be useless if the person is from Russia and is using social media websites specific to the language and location. There are also social groups on the Internet that may be familiar to the same social groups, but not to others.

Having a better understanding of the cultural and demographic context that underpins fraudulent activity is key.

Limited reach

Up to now, where investigations are being conducted by external resources, such as private investigation agencies, they have tended to be limited. In general, the investigations focus on public documentation, surveillance, witness locations/statements, claim applications and easily accessible web-based technologies (usually sites such as Facebook and Twitter).

To be even more effective, investigations should be carried out and sources of information pursued in as many languages and dialects – up to 150 different languages and dialects are spoken internationally – as possible. Fraud programs must adapt accordingly and broaden the scope of research to include multicultural, indigenous sources (for example, country- and/or location-specific media sources, social media and open sources).

Information derived from these types of sources, in turn, should form part of the investigation plan.

Improved access

Effective investigations are enhanced by professionals able to communicate in more than one language.

The experience of 3C Investigations, for example, has been that international multicultural services, including fraud programs, must match investigators with vetted, professional, capable and, wherever possible, accredited interpreters and translators to enhance the ability to acquire information.

The partnership between investigators and interpreters/translators provides the opportunity to uncover and track “leads” which can then be verified through other tools such as surveillance and “home” social media reviews. The idea is to foster partnerships to bring a “cultural” understanding to the investigation, which further points to emerging investigative avenues such as non-traditional social media.

Spotting the red flags

International multicultural services should be considered when red flags are evident, such as the following:

  • a general issue of concern is where fraudulent behaviour can be linked to organized rings that have international activities;
  • with automobile claims, a red flag would be staging of a collision with other individuals who are known claimants and where the activity is determined to have occurred in several jurisdictions, or premium payment has been avoided by reporting a false Canadian address or identifying a foreign location as the primary address;
  • for property and theft claims, concern would be evident if the insured had a history of multiple claims and, in the course of the claim-settlement process, tended to push for a quick settlement, displayed extensive knowledge of insurance terminology or insurance claims processes, settled quickly for a smaller amount and directed the payment to an off-shore account or address; and
  • with regard to organized scams or pitches, a red flag would be the point of origin of the originating call or email.


There is significant empirical evidence to support the need for fraud prevention in Canada. For example, a 2014 survey of 1,500-plus Canadians, carried out by Leger Marketing, found that 12% of respondents would put unrelated damages on an auto accident claim, 11% would inflate what was stolen from their vehicles, 13% would exaggerate the value of items lost in their stolen luggage while on vacation, and 25% would keep payment for an insured object even if it was found after the claim was paid.

To combat fraud, insurers are taking a number of actions. These range from legal remedies to using analytics and technology, including predictive modelling and fraud network analysis.

The adoption of international multicultural background services should be considered an additional tool in this offensive.

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