What the P&C industry must do to fight auto insurance fraud

Collaboration within the Canadian P&C insurance industry is key to fighting fraud, but this is tricky because of data sharing and privacy concerns.

Fraud concerns have become more pronounced during the novel coronavirus pandemic. P&C industry experts have warned that Canadians short on cash because of the current economic recession — which itself arose from government-ordered business shutdowns to contain the spread of the novel coronavirus — may seek desperate measures to pay off car loans or debt.

As reported in Canadian Underwriter recently, one typical pandemic insurance scam would be to report a car stolen, then burn it and collect an insurance payout for the total loss.

The P&C industry talked about how to crack the collaboration nut just as the COVID-19 crisis hit, at the first Insurance Fraud Forum hosted by Insurance Bureau of Canada (IBC). Maybe among the industry’s last in-person events, the forum was held in Toronto on Mar. 11, the same day the World Health Organization declared COVID-19 to be a global pandemic.

IBC president and CEO Don Forgeron opened that conference by saying the goal of the forum was to find ways for the industry to collaborate to prevent insurance fraud. “The goal is to learn from one another,” he said. “Programs, strategies, tactics — anything that can help in the fight against fraud, and to protect against the consequences it has for our economy, our businesses and our society.”

At the time, Forgeron highlighted how IBC works work with law enforcement to combat fraud — such as training, assisting in investigations conducting education campaigns — and that the relationship can be greater extended.

“One specific way in which law enforcement may be able to assist further here in Ontario is through the government’s new Serious Fraud Office,” Forgeron explained, noting that IBC was “encouraged” when it was set up and “relieved” that it will continue under the current provincial government.

“The [Ontario] government has made clear that it is willing to develop a fraud reduction strategy,” Forgeron said. “And that it’s willing to listen when law enforcement comes forward with information about potential serious fraud in Ontario.”

Forgeron also called on insurers to continue to work together more often to prevent fraud. Insurers have come together more commonly during recent times to set aside competitive differences and work together on an issue that is hitting all companies across the board.

“Years ago, many insurers saw fighting fraud as a potential competitive advantage,” said Forgeron. “It was, in many ways, every company for itself. Now, IBC member companies are demonstrating the benefits of ongoing and meaningful collaboration.”

Forgeron reported then that nine carriers were working together under CANATICS (Canadian National Insurance Crime Services),  which uses analytics to identify suspicious claims. “The team is currently working on a number of cross-insurer fraud investigations,” he explained. “To date, more than 20 complaint referral packages have been shared with the regulator, health regulatory colleges, law enforcement and a municipal enforcement agency.”

Forgeron provided an example of the benefits of collaboration, noting that CANATICS flagged a vehicle storage facility in Brampton that was accused of charging excessive fees for insurers. Insurers further claimed that the facility had refused to release vehicles as a way to run up storage costs. By working together, the scam was disrupted.

“We are just beginning to understand the many benefits of having insurance companies work together to reduce fraud,” Forgeron said. “We’re spotting trends that we couldn’t see before – when each company was trying to solve this problem on its own.”

But there’s an issue around data. Customers are wary of their info being shared, and those privacy concerns must be acknowledged. “The disclosure of information should never be taken lightly,” Forgeron said. “Regulatory oversight needs to be established.”

It will take a collaborative effort across multiple industries to tackle fraud, Forgeron pointed out. “I have been in the insurance business a long time. I’ve learned that no single group can solve the challenge of insurance fraud on its own. Our industry must lead the way, but we can’t do it alone. Regulators and government can’t do it alone. Law enforcement can’t do it alone. But each of us has a role to play. Each of us can contribute to a strategy that works.”