Canadian Underwriter

Devious ways your clients are trying to get better auto rates

May 30, 2018   by Greg Meckbach

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Territorial ratings have prompted some Ontario motorists to lie about where they live on their applications in order to get a lower auto insurance rate, so brokers need to caution clients on the importance of telling the truth, a local broker association director warns.

Insurers recognize that drivers filling out an insurance application may be tempted to claim they live in a small town in rural Ontario, and thereby “save a ton of money,” Joe Carnevale, associate broker and director of sales for Concord, Ont.-based Brokers Trust Insurance Group Inc., told Canadian Underwriter recently. He is the director of Territory 10 (Metropolitan Toronto and York region) for the Insurance Brokers Association of Ontario.

This is because territory – in essence, where the car is used, and where it is parked when it is not used – is one way auto insurers determine premium.

Ontario in recent years has had the highest auto premiums in Canada, wrote David Marshall, special advisor to Finance Minister Charles Sousa, in a report released in 2017. “When people find that their rates are going up they look for creative ways to get a lower rate, artificially,” he said. “The industry has caught on to that.”

Before the Ontario election, political parties commented on the difference between urban and rural insurance rates. The Ontario PC Party and the New Democratic Party have gone so far as to say they would abolish territory as a rating factor for calculating premium if elected. During the election, neither party has emphasized this aspect of their platforms.

Ontario motorists living in densely populated areas tend to pay more for auto insurance than if they lived in sparsely populated areas, brokers have told Canadian Underwriter. The rationale is simple: more traffic generally translates into a greater collision risk.

The fact that some clients lie about their address is a symptom of the public’s frustration with higher auto insurance rates, suggested Carnevale.

The Financial Services Commission of Ontario said the average premium went up 1.03% in the fourth quarter of 2017 and up another 2.23% in the first quarter of this year. A government attempt to cut the average premium by 15% between 2013 and 2015 failed.

Carnevale said he asks some customers what “security” they would have, in the event of a claim, if they put a false address on their application for auto insurance. He suggested “the bigger the claim,” the harder the insurance adjuster will work to verify that the claimant’s application information is correct.

If a claims adjuster finds that a claimant has lied on their application, this “would have severe ramifications for long term,” Carnevale advises clients.  Instead of saving a few thousand dollars, a claimant who is found to have lied on an application for auto insurance could be out of pocket more than $1 million because their claim was denied.

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6 Comments » for Devious ways your clients are trying to get better auto rates
  1. In this cadence we need to start postal code validation – kind of easy to implement if we rely on address on drivers license … another automation required … data mining can be helpful

    • Ray Hope says:

      Even with address validation on the insurance company side the problem still remains. Applicants simply go to the MTO and change the address on the licence and registration. What is needed is address validation on the side to the province. MTO should verify for valid address before issuing new documents.

    • Carrie says:

      Not so…you can go to the MTO and change your address and they don’t have for proof you live there.

  2. EVIE80 says:

    In my opinion, part of the fault for this lies with the industry for allowing auto to become commoditized. Clients rely on shopping for the cheapest premium because we haven’t taught them any better. Consumers no longer recognize that each policy has unique features tailored to them. In addition, the culture of ‘fraud is perfectly acceptable” has not been corrected by the industry. Yes, we investigate and yes, we tell folks about it, but clients need to know what the increased cost translates into for their policy. E.G. $5m in fraud translates into approx $100 increase to their premiums if passed along dollar for dollar to consumers. The industry needs to change the consumer mindset about insurance in order to make meaningful change. Just my two cents.

  3. ted j says:

    There is other problem with the premium increase…. FSCO says that average premium increase is 2.33 % but in realty GTA drivers are hit with 10 to 15 % increase while Northern Ontario drivers get a .05 % increase …It is misleading

  4. Carrie says:

    My opinion is that because GTA has the highest population, that is all the government cares about and where they get the most votes, hence them all trying to gain voters by saying they are getting rid of postal code rating. If there weren’t so many fraudster in the GTA, the rates would not be as high as they are. Insureds, tow truck drivers, medical assessment centres have all been involved. Until they actually starting handing out jail time and higher fines, nothing will change. Even now when an insured is found to be fraudulent, the insurance company voids the policy instead of cancelling for fraud.
    Companies need to start denying more claims and the legal system needs to start actually giving the jail time.

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