COVID’s impact on insurance fraud

Fraudsters are taking advantage of anxieties arising from the COVID-19 pandemic to exploit victims in the Canadian P&C insurance space in novel ways, speakers said during a fraud webinar Wednesday.

For example, some body shops are charging drivers extra cleaning fees and storage days for vehicle cleaning. In staged collisions, some fraudsters are using COVID as an excuse to leave the scene of an accident or to capitalize on the lack of police reports due to COVID restrictions.

When the economy is in decline, insurance fraud tends to increase, webinar panelist Jeroen Morrenhof, CEO and co-founder of FRISS, observed, citing a recent report from Insurance Bureau of Canada. Morrenhof said the trend is clearly seen at FRISS, a P&C insurance fraud detection software company.

“In the first few months after COVID hit, we saw a decrease of about 45% in claims across our customer base,” Morrenhof said during the Canadian Fraud Prevention Month 2021 webinar. “But at the same time — there’s obviously a little bit of a delay — we’ve seen a doubling in claims that are under investigation. Insurance fraud is definitely on the rise because of COVID and we do expect that to remain for the next couple of months [and] years ahead.”

Clockwise from top left: Moderator Andrew Vogeney, marketing manager at FRISS; Jereon Morrenhof, CEO and co-founder of FRISS; Sindy Houle, FRISS’s head of sales in Canada; Jeff Cirino, FRISS’s customer success manager for North America.

Over the past several years, FRISS’s customer base has seen most of the schemes that fraudsters have had to offer. But now the scams are taking on new forms.

“They’re much more exaggerated as a result of COVID-19 and they’re presenting challenges for investigators,” Jeff Cirino, FRISS’s customer success manager for North America, said during the webinar.

Some of the new schemes include:

• Body shops preying on consumers’ fears of contracting COVID-19 and charging extra cleaning fees or storage days for cleaning
• Staged collision actors are capitalizing on the lack of police reports and using COVID as an excuse to not stay at the scene of an accident or go to the hospital. “There’s a lack of exchange of information, so there are opportunities for people to make claims after the initial crash,” Cirino said. “We’re seeing a lot of that.”
• Ride-sharing operators are dumping or even burning their vehicles. “Their motivation is backed by a decrease in demand for services,” Cirino said.
• A rise in residential arson or water damage. “Financial stress [is] creating more opportunities. You may see some detached garages or sheds being burned or damaged to generate an influx of cash.”

As for towing schemes, the turf war and fight over territories (including homicides) show fraud is not a victimless crime, Morrenhof said. “These fraudsters, these organized crime rings, they actually do their market research as well,” he said. “They know what the weakest links are. They know what kind of controls are in place at the carriers or the law enforcement agencies, and they know how to take advantage of that.”

Morrenhof applauded the recent towing guidelines in Ontario that provided responsibilities for tow operators that “remove some of those weak links.”

Sindy Houle, head of sales in Canada for FRISS, said  COVID has augmented two elements of insurance fraud. First, less information is available and parties are more likely to be rushed through the exchange of information, or a police report may not be available. “This makes it extremely difficult to investigate.”

Second, fewer vehicles are on the road, but accidents are more severe. “How easy is it for fraudsters to exploit what’s happening now?” Houle asked, referring to the fact that fewer vehicles involved mean fewer witnesses, thereby making it easier to perpetrate a fraud scheme. “It’s easier to report somebody [is] driving that wasn’t. It’s easier to have people sitting in the car that were not because there are [fewer] witnesses.”

Feature image via iStock.com/zoff-photo