Auto insurance fraud costs drivers more than $1 billion a year. Here’s how to avoid getting scammed

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If an insurance agent asks for a fee while you’re shopping for a policy, alarm bells should go off.

According to experts, this is just one form of auto insurance fraud that Canadian drivers should be aware of.

Auto insurance fraud costs Canadians more than $1 billion a year in added insurance premiums, according to a 2020 report from the Insurance Bureau of Canada.

“If an insurance broker claims that you need to pay a fee for their services, that’s a red flag right there,” says Matt Hands, vice-president of insurance at Ratehub. Insurance agents typically make a commission from their company, not from charging fees to clients. 

To ensure the agent you’re working with is legitimate, Hands recommends you verify their employment with the insurance company they claim to work with.

“You could check to see if their brokerage is legitimate,” says Hands. “You could look online and see if there are any reviews to check if there’s a track record there.”

He adds that when dealing with a new insurance agent, take detailed notes and hold onto any important documentation — especially if something feels amiss. 

Another type of insurance fraud that drivers should be on the lookout for is a staged collision. A staged collision happens when one or more drivers purposefully cause an accident to make it seem like it was the victim’s fault to receive an insurance payout.   

If you suspect you’ve been involved in an auto insurance fraud scheme, Ivans and Hands recommend contacting your insurance company first, before contacting local authorities. This way, your insurance company can help you determine whether what you’re observing is in fact fraud. 

The other main form of insurance fraud that can affect an unsuspecting policyholder is a mechanic or auto shop inflating repair costs. In this scenario, a shop could claim to make repairs that weren’t actually needed, “and obviously the average consumer is not going to know what is and what isn’t needed when it comes to fixing their vehicle,” says Hands.

This type of scheme is particularly tricky to spot and can go undetected because it’s ‘victimless,’ explains Hands.

He adds that your best bet is to take your vehicle to a dealership that’s already been approved by your insurance company. 

“Fraud is something that impacts everybody,” says Hands. “Every driver in Canada feels the impact of fraud at some level because it’s reflected in the price we pay for insurance and the fact that insurance keeps rising on an annual basis.”

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