Who are Canada's $3b insurance fraudsters?

There aren’t any WANTED posters that can be sent out to brokers revealing the face of fraud in Canada, but there is a recent report that does paint a picture of the typical fraudster.

Risk Management News


There aren’t any WANTED posters that can be sent out to brokers revealing the face of fraud in Canada, but there is a recent report that does paint a picture of the typical fraudster.

The report on household insurance fraud for VFM Services has revealed that the typical fraudster is likely between the ages of 31-50, a first time claimant, and usually submits a claim for under $900 for accidental damage to a computer, TV or mobile phone.

“People who try to commit insurance fraud are highly likely to think a little crime won’t hurt anyone,” says Professor Mark Button, a fraud expert at the University of Portsmouth, “and are therefore opportunists rather than being serious professional criminals.”

It was the university that conducted the study on behalf of VFM Services.

“The claims investigated were of relatively low value (50 per cent were less than $900),” says Button, “suggesting people are more likely to commit insurance fraud if they feel they aren’t asking for enormous amounts and who see such crimes as only a ‘little dishonest.’”

VFM Services, who have recently launched counter fraud training and conversation management initiatives to the Canadian market, (see related article) analyzed almost 40,000 household insurance claims assessed through its New ERA conversation management process over the last five years. (continued.)

“We know that opportunistic fraud is a huge problem for the industry with fraud costing Canadian insurers around $3 billion a year,” says Sally Griffiths, director at VFM Services. “Whilst the value of each claim may be low, cumulatively the impact on the industry is huge.”

The VFM conversation management process is designed to provide insight into the profile of those who may lie/exaggerate to their insurance company and to help clamp down on increasing levels of fraud.

The report is the first of its kind to provide a psychological assessment of an ‘everyday’ fraudster, rather than organized criminals/serial fraudsters.  It also dispels some widely held myths of what a fraudster looks like, adds Button.

For example, the study revealed that there was no difference between gender – both males and females were equally likely to defraud their insurance company whereas previous studies found that fraud was thought to be more prevalent in males. (continued.)

“The findings in the report corroborate our experience from many years of investigating insurance claims in the U.K. and it is our belief that the profile of an opportunistic fraudster will be no different in Canada,” says Griffiths. “Rather than organized crime, we know that the majority of fraudsters are opportunists either looking to bolster a genuine claim by exaggerating what was stolen or lost, or those who think they can simply get away with claiming for the odd TV or carpet.”

Key findings:
•    The majority of claims were for accidental damage (82 per cent), as the claimant doesn’t need to obtain a police report, unlike a claim for theft where the fraudster could face potential consequences such as perverting the course of justice, or wasting police time;
•    Just over 50 per cent of claimants had submitted a claim within one year of buying the policy with just over 30 per cent within six months. Therefore claims made within a year of the policy being taken out could be at higher risk for fraud; and
•    There appear to be few ‘serial claimants’ with nine out of ten fraudsters having only made one previous claim or less, and just under three quarters of dishonest claimants had never made a claim before. This further supports the theory that most fraudulent claims are opportunistic.

Although the claims individually are small, it is important for the industry to stop this constant trickle of low-value fraud.

“Insurers appear to be reticent about investing in this low value fraud, partly due to the geographical issues unique to the Canadian market, and so these claims regularly slip through the net,” says Griffiths. “This is a false economy and perpetuates the public’s view that fraud is acceptable.”

Also see: 'Industry gives legislation a thumbs up'


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