Understanding Auto Insurance Fraud

There's no doubt that fraud has a negative affect on insurance premiums and although the police, the Federal and Provincial Governments, and the insurance industry are working diligently to prevent it from happening and prosecute those who are breaking the law, it requires the co-operation and involvement of the consumer to be part of the process. 

Of course, like any other crime, the public needs to play a big part in the prevention of this detestable activity and assist the experts by being involved in the process, fully aware of how scammers and fraudsters work the system, then be being willing to report wrong doing when they see it happen.

Part of that process is the educational component, whereby consumers have an understanding of how scammers take advantage of the system and know how to prevent fraud from occuring in the first place.

3 Common Ways That Fraudsters Cheat With Auto Insurance.

Staged auto accidents

Fraudsters deliberately stage auto collisions so that they can submit insurance claims for fake injuries and auto damage, often recruiting family, friends or associates to participate as a way of making additional money. Damage to vehicles may be pre-existing or be “enhanced” at a later date, in order to exaggerate the claim.

Tow truck scams

Operators may suggest certain body shops with whom they’re colluding in order to perpetrate fraud. They may also offer to tow your vehicle to a repair shop, then take it to their own facility and charge excessive fees for storage. Operators may offer referrals to other fraudsters in services related to resolving issues with the accident, such as lawyers or other legal services, chiropractors, physical therapists etc.

Body shop scams

Repair shops cause additional damage to a vehicle in order to amplify the claim, or they report damage that did not occur and charge for repairs that they didn’t have to make.

How To Help Prevent Auto Accident Insurance Fraud 

• If you’re involved in an accident, stay calm, call 911, ensure you are safe from further accident or injury, and deal with anyone who may have been injured.


• Record details by using an accident checklist, available at gobluecircle.com. 


• Use your cell phone camera to video record and photograph all the damages done to your vehicle, as well as the vehicles and drivers of anyone else who was involved in the accident. You can also capture images of license plate numbers, drivers licenses, pinks slips and other documents, as well as those of eye witnesses. 


• Do not rush into any decisions or discuss details of the accident with anyone other than police.


• Do not admit or discuss who is at fault.


• Don’t sign paperwork other than a police report.


• Write down/record every detail of the accident that you can remember at the time, no matter how trivial, as it can help jar your memory when proceedings take time to complete.


• Use only reputable tow trucks, preferably those that have a municipal license for towing services or who are associated with an automotive assistance group or auto association like CAA or AMA.


• Be wary of tow truck operators who recommend specific repair facilities without being asked, as this may indicate collusion of some sort with the body shop.


• Carefully read any documents before signing which are provided by the towing service.


• Remember, you have the right to have your vehicle towed to the location of your choice, unless directed otherwise by the police, and can ask your insurer to recommend one of their preferred shops.

How To Help Prevent Auto Policy Insurance Fraud

• Be very wary of anyone offering cheap insurance or making statements or offering policies for premiums that seem “too good to be true”.


• Only deal with reputable insurance representatives, such as brokers who are registered with the IBAA 


• If in doubt of an agent or insurance representative, use the link at Alberta “Government Insurance Companies” to confirm legitimacy. 


• Be wary of any agent who is requesting a referral fee or other such side payment.


• Ensure that when applying for auto insurance the document is an approved Alberta SPF 1 or CSIO Alberta - Application For Automobile Insurance.


• Auto policy applications and forms are legal contracts so read them over carefully before signing to ensure there are no mistakes, particularly if an agent has completed them on your behalf.


• Never sign blank insurance applications and documents (including claim forms, medical forms etc.)


• Do not pay insurance premiums through transfers or money wiring services, as this is not a practice in the insurance industry.

How To Report Insurance Fraud

• Again, be wary of deals that are too good to be true or offers that seem suspicious. If you feel like you’ve been a victim of fraud or suspect others of perpetrating a scam(s), report them.


• Call your local police


• Contact your insurance provider


• Submit a report anonymously to Crime Stoppers ( 1-800-222 8477)


• Contact the Insurance Bureau Of Canada to report a crime.

Everyone needs to work co-operatively to recognize and prevent fraud, which in turn will help keep the cost of insurance from rising.