Canadian Underwriter

Managing Vehicle Theft

October 1, 2003   by Serge Laporte, Boomerang Tracking Inc.

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Automobile theft costs Canadians close to $1 billion every year. To combat this alarming trend, vehicle owners should adopt a more proactive technological approach to risk management – and the insurer must provide the incentive to do so.

Automobile insurance has become an important concern for all Canadians, as increasing costs and accessibility have brought insurance reform to the forefront of the business and political scene. Notably, Ontario’s Bill-198 was adopted to help contain the cost of accident benefit claims with the hope that this will stem the rise in premiums for consumers. The Ontario government also introduced new measures to reduce fraud and auto theft at the end of August this year, again the objective being to reduce auto insurance premiums. The government believes that the latest anti-theft measures could see premiums drop by as much as 15%.

Over recent years, auto theft has continued to rise in Ontario, placing Ontario as the Canadian winner in car theft with over 45,000 stolen vehicles in 2002. Technological advancements have effectively reduced “joyriding” but have not reduced theft by professional thieves, who continue to find ways to bypass sophisticated vehicle security systems. In fact, the recovery of stolen vehicles has dramatically decreased over the last 10 years.

There is no question that auto theft has become “big business” with a high level of organization. Vehicles are now not only being stolen to “re-VIN” for resale in both the local market as well as offshore markets, but also for parts and components. Low recovery rates in central Canada, specifically in port cities such as Toronto and Montreal, suggest that professional thieves make up a larger proportion of the problem.

Insurance fraud is also increasing according to insurers. Due to the market of replacement value contracts and to the kilometer limitation in car leases, some individuals have more interest in having their cars stolen rather than returning them to the car dealers at the end of the lease. According to certain insurers, up to 15% of all insurance claims are said to be fraudulent. In the end, car theft is becoming an increasing cost problem for insurers, which ultimately results in further pressure on insurance premiums.


Insurers need solutions to enable them to rapidly reduce auto theft costs. This is particularly the case as both the value and replacement cost of vehicles has risen markedly over the years. A few cars stolen in today’s terms now represent significant dollars for the insurer. It is therefore important for insurers to promote risk management with their clients and encourage them to take proactive measures to better protect their vehicles.

Consumers today have little or no incentive to participate in managing the risk associated to theft for their vehicles. Insurers have no means to effectively reduce the risk of theft in a proactive fashion.

Currently, insurers offer limited financial benefits to consumers to protect their vehicles against theft. Today, discounts of up to 15% off the non-comprehensive portion of auto cover have been offered by insurers to encourage vehicle owners/drivers to install anti-theft devices. Simply put, this incentive is insufficient to convince the consumer to participate in lowering the theft risk.

Notably, in Quebec around 40 insurers have either mandated the installation of tracking systems in high risk vehicles, or alternatively offer attractive discounts to policyholders. Statistics show that, over the past 5 years, these tracking devices have resulted in the recovery of thousands of stolen vehicles and millions of dollars in savings to the auto insurance industry.


For the insurer, additional cost savings can be realized by becoming acquainted with the benefits of after-market vehicle security systems. Significant cost savings can materialize through reduction in theft claims, and even the cost of reinsurance can be dropped significantly when a vehicle is equipped with a tracking system. If these savings were passed on to the individual consumer by way of premium reductions, it would provide enough incentive to participate in risk management.

Regulators and insurers need to recognize these benefits and, in turn, educate brokers and clients on what measures can be taken to reduce auto theft. In summary, proactive recognition of tracking systems by regulators and insurers can benefit the whole community.