Partnership May be Latest Weapon in Battle Against Car Insurance Fraud

Monday, February 10, 2014

Damaged TruckCar insurance fraud in Canada is a serious problem that concerns both the industry and its policyholders, as the effects often cause premiums to rise. Through more intensive investigation and greater awareness, however, inroads have been made in holding criminals accountable, with penalties that have included jail time and costly fines.

And, with a recently formed partnership, the fight against auto insurance fraud should continue to be successfully waged.

The Canadian National Insurance Crime Services announced that it's partnering with BAE Systems Detica - an information intelligence firm - in order to look into auto insurance claims that raise red flags for being suspicious.

Ben Kosic, CEO of CANATICS, indicated that the partnership should make auto insurance fraud less of a problem for insurers and the law-abiding policyholders that they cover.

"We chose BAE Systems Detica as our partner because they have the knowledge, skills and services to give the Canadian car insurance industry superior intelligence from analytics on industry-pooled data," said Kosic. "By working with Detica, we will ensure our member insurers' investigators focus on the right claims to reduce organized and premeditated fraud in Canada."

CANATICS noted that this move was largely done in order to abide by the recommendations made by the Automobile Insurance Anti-Fraud Task Force. In November 2012, the AIAFTF advised that insurers should "move aggressively" to put in place an organization that focused chiefly on potential incidents in which claimants may be filing a claim that was manufactured or staged.

Chris Green managing director of financial crime for BAE Systems, indicated that the strategy Canada is adopting is a smart one. In his experience, insurers that work together are better able to spot insurance crime so that felonious claims are stopped dead in their tracks.

"As a consequence, fraudsters can less easily escape detection," said Green.

In addition to more investigative resources, insurance industry experts also attribute the ability to detect instances of auto insurance fraud to greater awareness among consumers for how to spot it. Though these crimes come in a variety of forms, some of the more common ways are by crafting crash scenarios, or more specifically staging car accidents.

The following are some of the more common staged accidents criminals resort to:

  • The swoop and squat. In this scenario, usually two to three cars are in on the scheme, taking advantage of an innocent bystander. When driving, the one who isn't in on the plot has to come to a screeching halt because one car - the "squatter" - pulls in front of the victim and jams on their brakes. But the reason they did so was because the vehicle ahead of them cut them off - the "swooper" - knowing full well that they would. This results in the victim rear-ending the squatter.

  • The start and stop. As the name suggests, this also involves the brakes, but doesn't necessarily require two or more people to be in on the scheme. All it takes is for the perpetrator to come to a stop, seemingly for no reason, forcing the trailing car to hit them from behind.

  • The drive down. One of the nicer things a motorist can do for their fellow commuter is to allow them into a lane when they're trying to merge. But fraudsters take advantage of this by waving someone in, and then just as they're moving, the suspect driver hits them. Later, they contend that the merging motorist was never given the go-ahead to merge, saying that they misinterpreted.

The Insurance Bureau of Canada devotes a section of its website to car insurance fraud, how to spot it and who to report it to when it's suspected.