The War on Staged Collisions

In February, Ontarians learned of a police officer in the province’s Peel Region who had just been convicted of participating in an organized auto insurance fraud ring. The officer had been providing accident reports to make staged collisions look like real collisions, resulting in more than $1 million in fraudulent claims being paid out. He was found guilty of more than 40 charges of fraud, breach of trust and obstructing justice.

For anyone who may still doubt how far-reaching and sophisticated these organized fraud rings can be, this story should put the matter to rest. Not only do these rings routinely involve auto body shops, tow truck operators and medical facilities – the entire service supplier chain – now one of them has even managed to recruit a police officer.

The “car accident business” is big. In a report issued in 2012, KPMG estimated that auto insurance fraud costs as much $1.6 billion a year in Ontario. The Insurance Bureau of Canada’s (IBC) Investigative Services unit currently has more than 60 fraud ring investigations under way, many of which involve dozens of staged collisions. And statistics show that a single collision, even a fender bender, can result in well over $100,000 in fraudulent claims.

How does the insurance industry fight a problem so far-reaching and sophisticated? It does so by being even more far-reaching and sophisticated. With help from governments, police and prosecutors, industry stakeholders need to be increasingly diligent and organized in identifying and shutting down these ever-evolving rings.

They move fast, and the industry response must be equally fast. It is necessary to also make consumers – honest policyholders – equally intolerant so that they can help in the cause.

RECRUITING CONSUMERS IN THE FIGHT

In the area of consumer education, IBC released the SafetyMobile app in March as part of Fraud Prevention Month. The aim is to help drivers recognize some of the different types of staged collisions so that they can help to detect and report these crimes.

The app is, to use the lingo, edutainment. It is fun because it is like playing a video driving game on a phone. At the same time, it shows the various types of staged collisions that innocent drivers can get pulled into. These are as follows:

The swoop and squat

A “swoop” car belonging to a fraudster suddenly cuts off a “squat” car with an innocent driver. Unable to stop in time, the squat car rear-ends the fraudster’s car.

The drive down

The fraudster pretends to yield, waving an innocent driver to proceed with a lane change or to pull out of a parking spot. As the victim makes his or her move, the fraudster drives into the victim, and later denies having waved him or her on.

The left-turn bullet (sideswipe)

The fraudster targets an innocent driver and purposely collides with the side of the victim’s vehicle. Typically, this is a left-turn situation where the fraudster waves the victim to make a left turn, then ploughs into his or her vehicle.

These are some of the more common types of staged collisions currently seen. Crime rings are expected to continue to develop new tricks to add to their arsenal, but the app goes a long way toward raising consumers’ understanding of the fundamentals of how these rings work.

The idea for the app came from IBC’s SafetyMobile, a simulator that the bureau takes to towns and cities around Ontario as part of the Safety Zone tour. The simulator has all the same features of a real car and takes drivers through scenarios to increase awareness about staged collisions. It also demonstrates the dangers of distracted driving.

Raising consumers’ awareness of fraud and what to look for is an important first step toward the critical next step – investigating and busting the bad guys.

WAR IN THE TRENCHES

Front-line claims staff at member insurance companies are increasingly becoming knowledgeable about identifying the red flags in a claim, and moving the file toward company investigators. Likewise, expertise among police is also rising.

To help educate these essential soldiers in the war on fraud, IBC makes presentations to police and member companies, training them on how to recognize fraudulent activity.

Efforts to date are focused primarily in Ontario and, specifically, in the Greater Toronto Area (GTA), which holds the dubious distinction of being the fraud capital of Canada.

The numbers make it clear where the auto insurance woes lie in Canada. The average accident benefits (AB) claim in Alberta and Atlantic Canada is well under $10,000; the average AB claim in Ontario is more than $30,000. This discrepancy cannot just be chalked up to “more drivers on the road in Ontario.”

Clearly, most claimants in Ontario are not fraudsters, but something else is going on.

A NEW TOOL

Another positive development in the fraud fight came earlier this month with the launch of CANATICS. CANATICS uses a sophisticated data analytics tool to look at pooled industry data and make connections and linkages about unusual behaviour that individual insurers cannot make on their own. If the tool sees something potentially suspicious, it sends an alert to the affected member company.

It is then up to the insurer to decide whether or not to investigate further.

Data analytics is a proven technique for fighting fraud and has been used successfully in the United States and the United Kingdom. Because organized fraud rings target multiple insurers, it is not always easy for individual insurers to pick up all the red flags. But a tool that can see multiple claims with multiple insurers can.

It should be emphasized the industry data is pooled, not shared, and there is adherence to strict privacy standards.

A CO-ORDINATED APPROACH

The crime rings are sophisticated and organized, so the fight to bring them down must also be sophisticated and organized. Consumers need to know what is happening, how to recognize fraudulent behaviour and what to do if they see it.

Through the new app and a host of other ongoing education efforts, progress is being made.

Further, insurers and police are increasingly knowledgeable and diligent in identifying and investigating organized insurance fraud.

Fraud, in general, is as old as insurance, but these organized staged collision rings, along with shady medical clinics, are a relatively new breed – and they are still evolving. The techniques for fighting them must evolve, too.

This includes adopting a co-ordinated approach. Taken as a whole, efforts by consumers, IBC, insurers, police and CANATICS are telling fraudsters that their days of threatening road safety and driving up insurance costs for everyone are numbered.

Industry players know the game that fraudsters are playing, and are developing a growing arsenal of tools with which to come after them.