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Provincial crackdown on auto insurance fraud a step ahead

Canadian Press THE CANADIAN PRESS

TORONTO — Ontario is cracking down on what it calls rampant auto insurance fraud, saying it will lead to rate cuts for the province's 10 million drivers.

Auto insurance rates are a thorny issue for the Liberal government, which is still trying to deliver on a promise it made to cut rates by 15 per cent on average from 2013 levels.

The government said Tuesday that it will develop standard treatment plans for common collision injuries such as sprains and whiplash, create independent and neutral examination centres to provide medical assessments for more serious injuries, and ensure that contingency fees set by lawyers are fair and transparent.

The plan would also establish a Serious Fraud Office, staffed in part by officers from the Ontario Provincial Police, to tackle abuse in the system.

Finance Minister Charles Sousa, who announced the measures with Attorney General Yasir Naqvi, said the cost of auto insurance fraud is estimated to be as high as $1.6 billion a year. By cracking down on abuse, and holding people accountable, the government can achieve a “substantive rate reduction,'' he said.

“Auto insurance fraud has become an industry,'' Sousa said. “It's time to stop it. If you know someone who has been engaged in this crime let the Serious Fraud Office know. They will pursue and investigate these fraudsters and bring them to justice.''

Sousa said the new measures will ensure accident victims receive appropriate care and are assessed independently by health professionals with no ties to an insurer. He could not immediately say what the plan will cost taxpayers or if it sets a specific rate reduction target.

Sousa also urged insurance firms to take action against fraudsters.

“If an insurance company, if the industry is telling us that there's abuse, there's fraud in the system, then stop settling,'' he said. “Stop settling fraud cases and let's start attacking the fraud and prosecuting the crime.''

In an interview with AdvocateDaily.com, Jim Downs of the Toronto-based investigative firm MKD International Inc. says the creation of a Serious Fraud Office is a good start to tackling the widespread problem.

“The idea is great, but we don’t know yet how it will work with the private insurance industry,” he says. “Fraudulent claims are prevalent and they are increasing. And there really isn’t much of a deterrent for someone to make a false claim.”

A provincial fraud office, operated by police, may go a long way to sending a message that there are consequences, Downs says.

If there were criminal charges for cases of fraudulent insurance claims, the incidence would decrease, he adds.

Downs, a former Toronto police detective and MKD's founding partner and managing director, says his firm is regularly hired by the insurance industry to investigate potentially fraudulent claims.

“For example, someone makes a claim that an accident has left them unable to work, and we go out and conduct surveillance and find they are shovelling snow, golfing or even working when they say they can't,” he says.

"We gather that evidence for the insurance company. It usually has to be lengthy because you have to show consistency and that it's not a one-time thing because the claimant will say they simply had a good day."

Downs says the prevalence of fraudulent claims mean that those with legitimate injuries have to go through "quite a scrutiny." Action needs to be taken, he adds.

A government-commissioned report earlier this year found that Ontario has the most expensive auto insurance premiums in Canada despite also having one of the lowest levels of accidents and fatalities.

The average auto insurance premium in Ontario is $1,458, which is almost 55 per cent higher than the average of all other Canadian jurisdictions, the report found. If Ontario's premiums were closer to the Canadian average of about $930, it would save Ontario drivers almost 40 per cent — or about $4 billion a year, it said.

Tuesday's announcement comes as the Liberal government is still trying to fulfil a promise to reduce rates by 15 per cent on average from 2013 levels — rates have now decreased on average by about eight per cent since then. The government missed its self-imposed deadline of August 2015 to hit that target and Premier Kathleen Wynne has admitted that was a ``stretch goal.''

Insurance company Aviva Canada said if the government implements its new measures, it will help lower rates. The company estimates fraud costs the insurance system $2 billion a year, nearly half a million more than the government estimates, said vice-president Gord Rasbach.

"If you address the fraud piece you will make an impact on rates,'' he said. "Fraud, at the end of the day, someone has to pay for it. It really comes down to people who are milking the system (at the expense) of a lot more people who are paying and are honest.''

The opposition Progressive Conservatives said the Liberals are only acting on insurance rates now because an election is less than six months away.

"Auto insurance premiums are still 55 per cent higher than other Canadian jurisdictions,'' PC finance critic Vic Fedeli said. "Four years ago this government promised a 15 per cent cut ... They have completely bungled this file.''

NDP finance critic John Vanthof, who noted the government plan to cut rates doesn't set a target, was doubtful the plan will result in a reduction of costs for Ontario drivers.

``They actually haven't talked about how much their new stretch goal for insurance going down (is),'' he said. ``They've talked about measures they want to take but there is no backup documentation for that.''

— With files from AdvocateDaily.com

© 2017 The Canadian Press

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