Being an insured driver comes with several responsibilities; you need to drive safely, make timely payments and be honest with your car insurance provider.
Being honest and transparent with your car insurance provider is extremely important for several reasons. Drivers need to be honest to ensure that their car insurance carrier provides them with the correct payout (when they submit a claim) and avoid an accidental car insurance fraud case.
Insurance fraud has been a severe issue for decades, but it's become even more prevalent over the past handful of years, especially in Ontario.
Continue reading to learn more about car insurance fraud, some common examples, how it affects car insurance rates, the consequences and what to do if you suspect someone you know is committing fraud.
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What is the definition of car insurance fraud?
Insurance fraud is the act of intentionally deceiving, defrauding or providing false information to an insurance provider.
Car insurance fraud is practically the same as traditional insurance fraud, but with a car insurance company.
What are some common examples of auto insurance fraud in Canada?
There are countless ways policyholders can intentionally or accidentally commit car insurance fraud.
Some common examples include the following cases:
- Organizing or being involved in the staging of a collision or car accident
- Providing false information about a loss that occurred due to a collision or car accident
- Submitting a fraudulent accident or damage claim (this includes pre-existing damage to a vehicle while submitting a separate claim)
- Colluding with healthcare workers in order to receive payments for unnecessary healthcare treatment
- Providing a car insurance provider with misleading information about the vehicle or related details (for instance, stating that a car is primarily parked in an indoor garage during the winter months, when it is usually parked in an outdoor parking spot)
- Providing false addresses to obtain lower rates
- Not disclosing all drivers in the home because of their inexperience or poor driving record, or stating the wrong principal driver of a vehicle to obtain lower rates
- Providing false information regarding the use of a car (for instance, distance driven to work, distance driven annually, etc.)
What are the consequences of committing car insurance fraud in Canada?
The Canadian government has strict and severe consequences for drivers that commit insurance fraud — this is because insurance fraud is a criminal offence.
Drivers that are caught committing insurance fraud, attempting to commit insurance fraud or have been found guilty of committing insurance fraud in the past can receive the following punishments:
- A maximum of two years of prison time for cases under $5,000
- A maximum of 14 years prison time for cases over $5,000
- The insurance claim will be denied
- Your car insurance company can drop you as a policyholder
- You will face higher car insurance rates (can be double or triple the regular cost)
- You will be unable to receive traditional car insurance
With all of this in mind, it's clear that committing insurance fraud is simply not worth the risk.
How does auto insurance fraud affect other drivers in Canada?
When a city or province experiences a spike in car insurance fraud rates, drivers are the first ones to feel the repercussions. In short, the average driver pays more for car insurance when fraud rates begin to rise.
When a policyholder successfully commits car insurance fraud, they are taking money from a collective "pool" of funds, so to speak. Insurance companies use these pools to pay out policyholders that have submitted valid car insurance claims.
But, when too many policyholders commit fraud, it rapidly depletes the pool, which puts pressure on car insurance companies. Car insurance companies are forced to increase their policyholders' rates to offset their losses. So, fraud doesn't just affect insurance companies; insurance fraud affects everyone!
When framed like this, it's clear that car insurance fraud creates a domino effect; when one policyholder takes money that isn't theirs, it forces other policyholders to pay more for coverage.
How can drivers do their part to prevent car insurance scams in Canada?
The simplest and most effective thing you can do if you think someone you know is committing car insurance fraud is to contact your local authorities. Your local authorities will be able to assess the situation correctly and bring the offender to justice (if required).
Additionally, you need to do everything that you can to prevent accidental insurance fraud. Before submitting a claim, take the time to read through your car insurance policy thoroughly. Doing this will give you a better idea of what information you need to provide, payments you need to make, etc.
If you aren't comfortable going through your policy by yourself (which is ok!) you can reach out to your Surex insurance advisor.
Some other useful tips for avoiding accidental insurance fraud include:
- Do not sign blank insurance claim documents
- Keep detailed records regarding your accident and obtain the name, phone number, address, licence plate and driver's licence number of anyone involved in an accident or collision
- Do not sign any documents at the site of an accident or collision
- Go over the do’s and don’ts of submitting a car insurance claim
Want to learn more about car insurance in Canada?
If you have unanswered questions about insurance fraud or car insurance in general, don't hesitate to reach out to one of our trusted advisors.
Our advisors are always happy to answer your questions about various types of insurance, add-ons and more. Once all your questions have been cleared up, we can supply you with a list of quotes from Canada's best car insurance companies and guide you towards a product that works for you.
