Stalking Fraud

It may not have been the 11th hour, but it was close. The Ontario Automobile Insurance Anti-Fraud Task Force released its report — promised for the fall of 2012, following a sneak peak this summer — on November 22.

åWhen the task force’s steering committee sought input on proposals last summer, it could not affix a precise number to what auto fraud was costing the system and its players.

Citing a KPMG study, the range was about $769 million to $1.6 billion. Ernst & Young indicated the figure may have been underestimated “because it does not specifically address premeditated fraud, which could range between $130 million to $260 million per year.”

Despite failing to nail down a specific number, it was agreed the problem was big and in need of remedy. “Auto insurance fraud is a significant problem in Ontario,” Dwight Duncan, Ontario’s finance minister, said after the release of the task force’s final report. Fraud, abuse and waste in Ontario auto “contributes to increased claims costs and leads to consumers paying higher premiums. A vital part of combating auto insurance fraud in Ontario is informing and engaging drivers so they can detect fraud and avoid becoming victims,” Duncan said.

Some proposals noted by the steering committee last July — regulation of health clinics and the towing industry; tightened controls on the delivery of auto accident benefits; and enhanced authority of the Financial Services Commission of Ontario (FSCO) — have made the cut. The 38 recommendations in the latest report are wide-ranging, covering the broad areas of prevention, detection, investigation and enforcement, and regulatory roles and responsibilities.

A number of recommendations to government have already elicited tough talk and hard stances.

• require insurers to disclose publicly how they choose and assess the performance of businesses and professionals they recommend to consumers or refer them to see, such as independent medical examiners;

• implement a province-wide licensing scheme for the towing industry;

• reduce uncertainty and delay for those who have legitimate auto insurance claims by moving aggressively to address the current backlog of mediation cases before FSCO; and

• adopt a $500 fee for missed medical exams.

With regard to the last recommendation, it appears the intent is to dissuade fraudsters who would expect that false claims would be caught in a defence examination, Andrew Murray, a civil litigation lawyer and current president of the Ontario Trial Lawyers Association (OTLA), said in an interview with Canadian Underwriter after the report’s release. Murray noted, though, that measures already exist to penalize uncooperative claimants.

“We say that the penalties are already adequate and that this would be an unnecessary punitive measure,” he added.

The Fair Association of Victims for Accident Insurance Reform would surely agree. The $500 cancellation penalty is not fair and should not be considered an effective tool against fraud, FAIR stated in its response to the final report.

BEEFING UP FSCO

Perhaps the biggest move flowing from the comprehensive review, however, is found in the recommendations to substantially expand FSCO’s authority. Either as a result of legislative change (through amendments to Ontario’s Insurance Act) or government direction, this proposed power hike seeks to equip FSCO with the tools to support and promote reduction of fraud. Consider these recommendations to government:

• enhance FSCO’s powers to investigate and sanction unfair or deceptive acts or practices;

• give FSCO the authority to oversee and audit the business and billing practices of health clinics and individual practitioners who invoice auto insurers;

• provide a range of sanctions for FSCO to apply where clinics are not following FSCO’s business-practice standards, including the ability to limit or curtail a regulated facility’s access to the Health Claims for Auto Insurance system;

• have auto insurance fraud investigators working in the private sector provide information to FSCO where it would be relevant to detecting, investigating and enforcing sanctions against those engaged in organized or premeditated fraud; and• endorse and require the development of protocols for active information sharing about suspicious cases among the investigative divisions of FSCO, the Workplace Safety and Insurance Board and the Ontario Health Insurance Plan.

In keeping with the new responsibilities, the provincial government should consider revamping FSCO’s mandate. An independent review, within three years of the mandate being finalized, should also be carried out. “FSCO will have to recognize that it will no longer be ‘business as usual,’” notes the report.

ONE AND ALL

Another recommendation that could have legs is the call for insurers to move aggressively to establish an organization that would pool and analyze claims data to identify potential cases of organized or premeditated fraud.

That would demand Ottawa move to secure passage of amendments to the Personal Information Protection and Electronic Documents Act, the goal of which is to remove any undue limitations on the ability of insurers to pool claims information to combat fraud, the report notes.

The task force also recommends that government consider amending Ontario’s Statutory Accident Benefits Schedule to allow insurers to suspend income replacement benefits when there is compelling evidence that a claimant has submitted a fraudulent claim for medical or rehabilitation accident benefits.

Further, government is being urged to amend the rules so claimants play a more active role in helping detect and prevent fraud. They should be required to confirm attendance at treatment facilities and receipt of goods and services billed to insurers, as well as require insurers to itemize the list of invoices they have received when they provide a benefit statement to a claimant every two months.

Reporting, essential to fighting fraud, would be fostered by the recommendation for government to introduce legislative protection prohibiting reprisal or retribution against individuals who, in good faith, provide information about suspected fraud.

MOVE FORWARD

The Insurance Brokers Association of Ontario (IBAO) has urged the provincial government to accept and implement the report recommendations. “If implemented, it will represent a giant step forward to combat fraud and abuse that will ultimately lead to lower premiums for Ontario drivers,” argues Randy Carroll, CEO of IBAO.

Ralph Palumbo, vice president, Ontario for the Insurance Bureau of Canada (IBC), echoed the call to move forward. “This marks a significant step in the fight against fraud, raising awareness and sharing best practices for fraud prevention,” Palumbo said at the time.

IBC is optimistic the recommendations will be implemented in the coming weeks and months, notes a statement from the bureau. “We will continue to be vigilant on the fraud file and work with law enforcement, insurance companies, government and the public to investigate fraudulent activity, and to continually raise awareness of a problem that affects everyone,” Palumbo notes.

The cost of auto fraud in the Greater Toronto Area is as much as $540 per insured vehicle, IBAO points out. “We need to do what we can as soon as we can to remove that cost,” Carroll adds.

IBAO contends that everyone — from government to consumers, insurance companies, lawyers, health care practitioners and collision repair facilities, among others — has a role to play in combating fraud so that auto insurance remains both affordable and available.

What is critical to OTLA
is that legitimate claimants are not negatively affected by efforts to target fraud. “I think generally we all want fraud to be eliminated from the system,” Murray said.

“What we certainly don’t want the public to take away as a message is that the whole system is filled with fraud and every claim needs to be eviscerated or scrutinized because that’s really, really doing a disservice,” he noted.