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Types of Insurance Frauds to Watch Out For

Only a few Canadians commit insurance fraud, but its consequences affect everyone. Each year fraud costs insurers billions of dollars, which raises premium averages. Unfortunately, many of these fraudulent activities involve innocent parties, making it hard to detect. Awareness of insurance fraud and its many forms is the first step in preventing it.

By definition, fraud cheats the insurance system through inaccuracies in a claims report. These inaccuracies can range in severity—but they are always intentionally deceptive and malicious. Some examples of fraud include:

  • Lying about the conditions of a claim to mask negligence or participation;
  • Including previous or unrelated damage on a claims form;
  • Withholding information that would otherwise affect the policy and its payout;
  • Staging an incident to receive insurance compensation.
Insurance Fraud Affects Everyone

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The final form of fraud, staged incidents, applies largely to auto insurance. In recent years, staged collisions have grown in popularity. Below describes some of the common scenarios involving fraud.

  • The driver rams an innocent vehicle, making it look like an accident.
  • The driver hits his or her breaks to cause another driver to rear-end the vehicle.
  • The driver waves in a merging vehicle then enters into a collision.


The Legal Repercussions of Insurance Fraud

If your insurer suspects or convicts you of insurance fraud, various things can happen. Firstly, the insurer will deny your claim. If the company decides not to cancel your policy, you may end up paying higher premiums in the future. Otherwise, you will lose your premium and become uninsurable by many other brokerages. Criminally, insurance fraud can also incur up to 14 years’ imprisonment for cases above $5,000.

To learn more about insurance fraud and how it affects you, watch the video below.

Why All New Drivers Absolutely Need Insurance

Why All New Drivers Absolutely Need Insurance

On the day you pass your G2 exam, you begin adding experience to your driving history. If young and living at home, this means you’ve graduated to a secondary driver. With your own vehicle, a G2 marks the day you need an independent policy to cover you from theft and damages.

Unfortunately, new drivers—especially those under the age of 25—pay hefty insurance premiums. Based on statistics, new drivers in this age group have proven themselves the riskiest. To offset the risk, insurance companies charge higher premiums. Thankfully, you become safer to insure over time, so long as you build insurance history.

Without insurance, even as a secondary driver, you:

  1. Cannot drive;
  2. Fail to demonstrate your driving habits.

Without experience, insurers cannot assess you and must resort to standard premiums. Therefore, by avoiding insurance when most at risk, you actually prolong its disadvantages. It’s better to start building history right away, despite the high costs.

One example of how history affects your premium is the no-claims bonus. Some policies stipulate that every five years without a claim, you premium drops. Thus, if you buy a policy at 18, you’ll be eligible for further discounts by the time you pass your 25 milestone.

Why All New Drivers Absolutely Need Insurance

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Do You Need to Insure a G1 Learner’s Permit?

During your G1, you do not need an insurance policy. This is because your license requires supervision by a fully licensed and insured driver. That said, when you get your G1, ask your supervisor to call into his or her insurance company for advice. The broker can recommend when you need a policy of your own and at what cost.

How to Reduce Your Premium as a New Driver

If you complete a Ministry of Transportation approved training course, you can save on your premium. Students, too, can earn further discounts when living more than 100km from home. However, student discounts only apply as an occasional driver. Otherwise, you will need to take the following steps to obtain incentives:

  • Refrain from modifying the vehicle;
  • Choose an economic mid-size vehicle;
  • Install security systems and/or alarms;
  • Increase the vehicle’s safety with accessories like snow tires.

To elaborate on vehicle selection, many factors affect a premium. For instance, how often that type of car is stolen or involved in a collision. That said, young drivers should avoid buying cars with big engines. Likewise, coupes and convertibles might rev up the price.

Never lie on your policy to unlock better premiums as a young driver. Commonly, new drivers purchase vehicles under a relative’s name to qualify as a secondary driver. After a few years, they assume the role as primary, once the rates have fallen. While a sure way to save money, it’s dishonest and can void your insurance altogether. For more information on insurance integrity, please read our previous post.

Did You Know Non-Payment Can Hurt Your Premium?

Missing a payment on your insurance premium can get you into steep trouble. Even if accidental, delinquency can lead to consequences.

  1. Policy Cancellation: After weeks of non-payment, expect to receive a notice of cancellation. Such a letter gives you a period to catch up on payments before losing your policy.
  2. Premium Increase: Insurers may consider you high risk if you demonstrate financial unreliability. In effect, you will pay more per year for coverage.
  3. Loss of Privileges: The payment terms of your premium may change after non-payment. In particular, you may lose the right to pay monthly. Instead, you will need to buy your annual premium up-front on its renewal date.

Because life happens, the scenarios above do not always apply. If you changed bank accounts or forgot about the bill, you might receive a small fee, but the matter ends there. When you repeatedly miss payments, that’s when you jeopardise your existing policy.

How to Avoid Non-Payment

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How to Avoid Non-Payment

If you’re experiencing financial stress, speak with your broker. Transparency allows your provider to recommend ways to cope with, reduce or budget more effectively for your premium.

When setup for automatic withdrawals, you may want to protect yourself from insufficient funds. You can do this with overdraft protection. Although debt, it keeps your account from declining transactions with a negative balance.  If between cheques or short on cash, overdraft prevents non-payment.

Non-Payments Do Not Disappear

If the insurer cancels your policy, it does not exempt you from paying backlog. Any amount owing still belongs to the insurer. Thus, switching companies won’t leave that debt behind. If you continue not to pay, other insurers might disqualify you. As well, collection agencies will start to harass you.

Non-Payments Do Not Disappear

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Waiving Your Duty to Disclose Can Leave You Uninsured

Waiving Your Duty to Disclose Can Leave You Uninsured

Don’t be like 19% of other Canadians who lie on their insurance applications. Respect your duty to disclose and tell your insurer the truth. Contrary to popular belief, lying can cost you money—not save it.

How Many Canadians Lie to Their Insurers?

According to a 2012 consumer’s poll, one in five Canadians omit details on their policy. They fib about their annual mileage, parking location, primary driver, and accident history. More than 40% get caught and pay dearly for it.

Another survey found that 34% of American drivers falsify their insurance applications. Consequently, more than half of offenders face severe financial repercussions.

Waiving Your Duty to Disclose Can Leave You Uninsured

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The Consequences of Non-Disclosure

Lying to your insurance company can void your policy outright. The details that you omit ultimately influence the coverage you’re approved for and at what premium. Regardless if a claim relates to the suspect part of your insurance, lying affects the whole policy.

Of course, non-disclosure comes in many forms. The consequence per situation varies, but it is your duty to always ensure transparency and honesty. Here are four common types of delinquency.

  1. Deliberate:You hide or skew information to receive a better premium.
  2. Reckless:You do not take your application seriously and fail to verify your answers. Worse, you leave it to another person to complete and submit on your behalf.
  3. Innocent:You falsify your information because you misinterpret the questions or find them ambiguous.
  4. Inadvertent: You lie or omit a detail without breaking good faith. Although negligent, the intent was not malicious.

It is hard to distinguish inadvertent non-disclosure from recklessness. The difference, however, can affect the outcome of a claim. Similarly, innocent non-disclosers often end most favourably. At best, the case becomes refutable, and you get the opportunity to correct your mistakes.

Nevertheless, honesty is the best policy when filing for insurance. Don’t get caught in a lie; it will affect your premium and eligibility for renewal or approval. The few dollars you might save is just not worth it.