Insurance Fraud Hits Ontario the Hardest: RBC

Claims, assessment costs jump between 2004 and 2009.

Insurance fraud is costing drivers in Ontario more than their counterparts elsewhere in Canada.

Fraud costs in Ontario top those in other parts of the country, pushing up the cost of premiums and claims higher than those in other provinces, according to panellists at an RBC Insurance roundtable on fraud.

Those costs represent an estimated $1.3 billion of $9 billion in premiums in the province, the insurance executives noted during the July 28 discussion.

That’s the bad news. The good news? Most Ontarians recognize that it’s up to drivers to curb the problem, and upcoming insurance reforms will help ease rising costs,

The average cost of a claim in Ontario rose from $30,000 in 2005 to $53,000 in 2009, according to Insurance Bureau of Canada (IBC) data. That’s markedly more than average claims costs in Alberta ($3,689) or Nova Scotia ($5,904).

False claims, “excessive” assessments

False claims start the fraud process, but unscrupulous clinics also help push costs up with excessive assessments and poor quality treatment. The average rehab claim from a “problem” clinic is $40,000, between 10 and 20 times higher than costs associated with similar injuries and rehabilitation though WSIB programs, the RBC research shows.

Between 2004 and 2009, costs for assessments rose dramatically, going from approximately $3,000 to $11,000, outstripping more modest cost increases for average vehicle repair and average medical costs during the same period.

Capping costs

The Ontario auto insurance reforms taking effect September 1 should help bring those costs down, noted Ken Bowman, head of life, health and casualty claims at RBC Insurance. The changes cut down on non-essential assessments, eliminate home assessments for minor injuries and contain non-insurer assessment costs within a $50,000 medical benefits maximum.

But the reforms can only go so far without consumer help, and more coordination between insurers and regulators, said Cathy Honor, president of the RBC General Insurance Company. Heightened regulation–including accredited clinics–along with improved industry fraud detection, would also round out anti-fraud efforts, she said.

And consumers appear ready to do their share. While 87% of respondents acknowledge that rates are higher in Ontario because of fraud and false claims, only 6% see insurance fraud as “the company’s problem,” an RBC/Ipsos Reid Auto Insurance Reform survey found.

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