What’s on Dec? | Episode 5 | Insurance fraud

Équité Association president and CEO Terri O’Brien discusses how the industry is tackling insurance fraud, including the use of artificial intelligence and data analytics.

During this Fraud Prevention Month chat, she’ll join hosts Pete Tessier and Curt Wyatt to touch on insurance fraud investigations, trends in auto insurance fraud, and patterns during the early days of the pandemic.

Also, she’ll talk about how criminals are trying to work around the broker channel to perpetrate insurance fraud. Listen for her red flags to help the industry foil fraudsters’ nefarious plans.

Text transcript

Intro:

You’re listening to What’s On Dec? the Canadian Underwriter podcast, focusing on the hottest topics in the P&C community, featuring insights, analysis, and interviews with subject-matter experts throughout the year.

Pete Tessier:

Hey. Welcome to What’s on Dec? the Canadian Underwriter podcast. What’s on Dec? is brought to you by Taycon Risk, the MGA that specializes in niche markets, hard to place, or unusually complex commercial risk. They turn hard risk into smart coverage the old fashioned way – they underwrite it. Curt, we’re talking about fraud today, and we have Terri O’Brien from Équité Association, who is partnering and, well, basically, not just partnering, but totally integrated with the best insurers in the country to deal with fraud.

Curt Wyatt:

Pete, Terri talks about some of the things that the association’s getting into. We’re limited to 10 minutes on this interview, but let’s just say there’s way more than 10 minutes of information that Terri shares. The organization that they are putting together to help Canadians is something that, as an industry, we need to know more about. The insurers have teamed together. They’ve built something here to make sure that the people who are trying to get away with fraud, as it relates to health, auto, number of different lines of insurance, for sure property, casualty as well — the time is up. These guys are going to catch them, Pete.

Pete Tessier:

I hope so. And Terri’s coming in, and she’s going to join us here shortly and sort of explain a little bit about what the trends are going on here. What happened during the pandemic? And is it changing since the pandemic ended? And what we should be looking for, no matter where you are in the insurance ecosystem, if you’re on the distribution side, the company side. And I think one of the most fascinating things she’s probably going to talk about is how they find this stuff. It’s a different way of catching criminals now than we are used to thinking. It’s not catching them in the act anymore.

Curt Wyatt:

Pete, there’s a new sheriff in town. It’s Terri from Équité. Let’s get her on and hear what she has to say.

Pete Tessier:

Yeah, let’s bring Terri in now. So Terri, thanks for jumping on with us and joining the show, What’s on Dec?

Terri O’Brien:

Great. Thanks for having me, Pete.

Pete Tessier:

So tell us a little bit then what you’re doing with the insurance industry and where you’re making impact and preventing and reducing fraud.

Terri O’Brien:

Sure, absolutely. Just to give a little bit of history, I would say the insurance industry in Canada has always provided us a foundation of security, but insurance crime fundamentally undermines that system of security and compromises our safety and security. So every insurer in Canada historically has had their own internal processes to detect fraud. The challenge is that the criminals are jumping from province to province and insurer to insurer exploiting the weakest links in our systems, our infrastructure, and our technology, and they’re taking increasingly sophisticated steps to exploit the insurance industry for fraud. We have teams across Canada that collaborate locally and nationally, particularly with law enforcement partners — including the RCMP, local law enforcement, and the Canada Border Services Agency — to detect and prevent these insurance crimes.

Pete Tessier:

So Terri, what are some of the ways you come in with the industry then? Obviously, you’ve got different elements of law enforcement, crime prevention, and such, but what are ways that you actually specifically support the industry? How are you working with insurance companies? What value do you provide them?

Terri O’Brien:

So an example would be a large-scale organized crime investigation that our investigators [would team up] with our analytics team [to lead] that investigation collaboratively with our insurers. So an example might be a suspicious insurance crime occurs with one institution or one insurance company. We would take that, look through our sets of data, and look for linkages, in where those insurance crimes may be happening in other provinces or with other insurers. And then, bring the industry together on that specific investigation, looking through the data and analytics, to find the patterns, to find all the various crimes that are being committed. And then, we share that information with law enforcement, so that they can do their own criminal investigation and proceed with prosecution.

Curt Wyatt:

So as you have been building this out, and remind us again, how many years has it been that you’ve been working in collaboration with the insurers?

Terri O’Brien:

Two years.

Curt Wyatt:

Two years. So the idea came about prior to the pandemic, and then, you’ve got up and working sort of during the pandemic. Do you see the pandemic as, and I’ve used that word way too many times now, but have you see the society be affected by any portions of what we’re going through? And have you seen any patterns in the last two years, as it relates to people within organizations? Say, you said you talked about following certain crime rings or things like this. Is there something that links back to what we’ve been through?

Terri O’Brien:

Absolutely. The pandemic was an unprecedented period, certainly globally, but for Canada as well. There was economic instability and financial stress. It created more opportunity for bad actors. However, specifically for the P&C insurance industry, during the pandemic, there was a clear shortage of vehicles, due to supply chain disruptions, and there was a chip shortage. And so, the industry also saw a huge demand for used vehicles and resale of vehicles. And coupled with that was an increase in auto theft, both the export of stolen vehicles being sold in other countries and the vehicles being fraudulently reVINed, which means putting a new vehicle identification number on it and being sold to unsuspecting Canadians domestically as well.

So organized crime groups, we saw the trends increase at a double-digit rate throughout the pandemic. They were using this resale market and auto theft as a way to launder money and fund other organized crimes, such as gun and drug trafficking. So these vehicles were at an increasing rate stolen throughout the pandemic and then exported out of Canada and sold domestically. We saw over a 50% increase in the province of Quebec in auto theft last year in 2022, which was a double-digit increase over 2021. And we saw Ontario was up 45%. However, across Canada, we’ve seen double-digit increases for the last two years.

Pete Tessier:

Terri, this vehicle theft is a huge trend, and I was going to ask you about it. So I’m glad you brought it up. What are some of the ways people, that you’ve heard or seen and what the investigations are saying people can prevent this from happening? Because I don’t think there is a day that goes by where you don’t see something on the national news about organized crime, figuring out how to duplicate the RF signal on a key fob and then, driving off with a $100,000 vehicle, whether it’s a pickup truck, a luxury vehicle, and that thing’s, if you’re in a major centre, it’s in a container before you know where it’s gone. Is there any insight on how we can prevent this from happening?

Terri O’Brien:

Yes, there is, and you’re absolutely right, Pete. Auto theft has been the largest crime trend that we’ve seen in the last two years, and technology is being exploited, as you mentioned, both relay technology, that captures the fob signal from inside the house. And there’s a new technology that compromises the onboard diagnostic port. So this would be something, from a repair standpoint, mechanics use it to reset the settings in a car. But-thieves use it to start the car remotely in under two minutes. And these technologies are being used to reprogram key fobs. You’re also quite right in that the luxury high-end vehicles are being stolen at an alarming rate and are going out through our ports or cross-border and then being sold overseas. So we do publish on our website some crime prevention tips and things that you can do. Of course, if you have a garage, a locked garage, that’s the best place to store your vehicle.

But some of the other things that you can do now, there are aftermarket technologies available for sale, in particular the mobile tracking devices. They’re actually mandatory in the province of Quebec, but they’re available for sale and they operate similar to an Apple AirTag, in that you can track the vehicle. But they’re more sophisticated and more hidden within the vehicle, so that they can’t be compromised as easily. There’s also good old-fashioned strategies, such as The Club, and vehicle wheel and brake locks. There’s also the onboard diagnostic port blocking tools, so that there are things that you can put inside the vehicle that will make them less desirable to be stolen, more difficult. Anything that takes more time or is more hassle is going to be a deterrent to thieves.

Pete Tessier:

Terri, one of the things that we talk about when it comes to fraud and stuff is how the different layers of insurance distribution and sales can be involved in it. What do you see from your association sort of viewpoint that the sales point, the distribution point, such as brokers and agents, what can they do to be a part of reducing fraud and obviously helping keep premiums in line, because of the expense that goes into managing fraud? Is there anything there?

Terri O’Brien:

So I think brokers are an integral part of the system, in particular because they know their customers. And so, organized crime is quite prevalent. So I think if there’s a repeat customer that’s coming back and they’ve had repeat auto theft occurrences, but they want to go with a different insurer. If you see patterns where they’re moving around their insurance and brokers may not see claims, but if there’s a multitude of claims and they’re happening across different insurers over time, I think that’s how they can participate as part of the ecosystem. However, it is difficult to detect, because the organized crime is sophisticated. They tend to hide in volumes. They more so would procure insurance through online or telephone means. So brokers are an important part of the ecosystem, but they are unlikely to really see a lot of the insurance crimes that are happening. That’s why it’s so important that we bring together the analytics, because it’s intentional and it’s intended to hide in the volumes and it’s intended to look like a normal customer. The analytics is really where we can detect the patterns of fraud.

Curt Wyatt:

Terri, it’s been a pleasure having you on. Your information is so valuable to the industry. And to be able to publish this through the Canadian Underwriter, we appreciate having you sharing what you’ve been up to in the last two years, and we wish you and your team the best of luck going forward.

Terri O’Brien:

Great. Thanks very much, Curt. It was a pleasure speaking with you both today.

Pete Tessier:

Curt, I never thought of where they’re going with analytics to drive into identifying trends and seeing the macro picture of what fraud looks like.

Curt Wyatt:

Pete, read between the lines. There’s something here that, as an industry, we’ve always heard about fraud. We’ve always known that there’s bad apples in the bunch, and we hope that doesn’t represent the majority of insurers. Obviously, it doesn’t, or the system wouldn’t work. But fortunately, there’s more to it than just picking out who’s good, who’s bad. There’s technology being played out here. There’s tools being used to determine where these patterns are going and what’s happening. And it’s sort of an interesting dive into distribution, as well as how insurance is being sold.

Pete Tessier:

And I think what I found really interesting was the levels of collaboration that are going on in all the entities to look at this stuff. I’m glad Terri touched on some of the hot points that we’re seeing with auto theft. And look, auto gets a lot of attention. But, as I said when we were talking to her, you can’t turn on the news right now and not see a story about vehicles literally being driven off people’s driveways. And it’s very interesting to learn how we can help guide consumers for protection, particularly when you think about what’s old is new, again, like The Club.

If that’s just a deterrent visually, that says “go on to the next one,” you’ve probably saved yourself a major headache. But where things are going to really sort of unravel is, when do they get this analytic stuff into a predictive model? And where does that start showing what could come next? Because organized crime always seems to be ahead of the curve. They always seem to be finding something new. And if we can get catch up to that, as an industry, as law enforcement, the potential to save the industry billions is there.

Curt Wyatt:

And you know what? We know a big portion of our audience is brokers and agents. And in addition to trying to save the consumer money by not paying claims that shouldn’t exist, the ability for brokers and agents to get involved in this and to see the value it brings to the table for the insurers, to have a local person with boots on the ground, there’s going to be something there. And I think as Équité builds out and continues to figure out how they’re going to fix this problem, agents and brokers need to be stepping up. They should be raising the flag and saying, “We are a part of this solution. We can help.” It isn’t just data. Sometimes, it’s old school underwriting. It’s old school, “I need to be there for my client and make sure that this is something that we can control and something that Canadians don’t lose out to the bad guy.” Because it is the bad guy.

Pete Tessier:

And we’ve sort of done some research on Équité, and the one thing is it’s got a huge insurance company presence. I’m not saying that’s wrong, but there is an opportunity to add value. You can get in touch with this company, and you can probably find some information that helps you deliver value to your customers, saving them immense costs. And we know what that means when you’re selling insurance. It comes back, and it makes your numbers look a lot better too. So, hey, I learned a lot about fraud today, and I’m looking forward to seeing where this industry takes it. Because Curt, it’s never been conquered. I don’t think we’re ever going to conquer this completely, but the industry is moving in the right way. And there’s opportunity here to move the needle, so that fraud is not something we have to think about to the degree we do right now. And that’s going to be beneficial for all parties in the ecosystem.

Outro:

Thanks for listening to What’s On Dec? the Canadian Underwriter podcast.