Insurance Crime

Insurance Bureau of Canada’s (IBC’s) primary goal in providing investigative services is to protect the premiums of honest policyholders by ensuring that insurance companies pay only legitimate and honest claims.

IBC has an 80-year history of providing investigative services to Canada's home, car and business insurers. IBC focuses its investigative efforts on organized insurance crime rings - specifically, rings involved in auto theft and/or filing fraudulent injury claims. In Canada, organized insurance crime continues to be a destructive and costly offence and represents a significant cost to insurers and policyholders - about $542 million annually. Once related costs for health care, police, emergency services and the courts are factored in, the annual cost of auto theft to Canadians amounts to $1 billion.

IBC is uniquely positioned to combat insurance crime

• Effective lobbyist. As the voice of Canada's home, car and business insurers, IBC can lobby governments for legislative changes that would deter insurance criminals. For example, IBC has requested that auto theft be recognized as a serious, violent crime (rather than a mere property crime) in both the Criminal Code of Canada and the Youth Criminal Justice Act. If passed by the federal government, Bill C-26 would make this change and several others to give law enforcement officials the tools they need to more effectively combat auto theft.
• Cross-country data. As a national association, IBC has access to insurance crime data from across the country, which it uses to detect trends within and across regions.
• Investigative body. IBC is designated as an investigative body under federal privacy legislation – the Personal Information Protection and Electronic Documents Act (PIPEDA) – meaning it is able to exchange information with insurers for the purposes of preventing and detecting insurance crime.
• Experienced investigators. IBC’s investigators have extensive insurance and policing experience. They have the unique knowledge and technological tools required for investigating organized criminal activity related to insurance.
• . IBC is a trusted partner with other insurance-crime-fighting agencies nationally and internationally. These partnerships mean that important information gets shared between IBC and, for example, police forces, making for effective investigations and increasing the likelihood of charges being laid.

IBC has an excellent track record as an investigative force. Every year, the work of IBC's investigative services results in millions of dollars in savings for insurance companies and their policyholders.

What You Can Do to Control the Cost of Insurance

Ask your insurance representative about the following options for lowering your premium:

• Increasing your deductible, or your share of the cost of a claim. By increasing the amount you are willing to pay, you will decrease your premium.
• Package deals for insuring your home and car(s) with the same insurance company.
• Installing a sprinkler system or a monitored burglar or fire alarm.
• Quitting smoking. Many home fires are caused by careless smoking. Many insurance companies acknowledge that non-smokers have a lower risk of fire loss.

In addition to shopping around and comparing prices and coverage, homeowners can further lower their insurance premium by:

• Building a consistent, claims-free track record.
• Not over-insuring the home by including the market price of the land in the insured value. Whatever the limits of your policy, you cannot claim for more than the actual loss to insured property. “Insured property” does not include the market value of underlying land. You should insure your home for what it would cost to rebuild it in the coming year (replacement costs). Don’t pay extra premiums for nothing.
• Asking about other discounts. For example, some insurance companies provide discounts for seniors.

Impact on Insurance Premiums

Impact on Insurance Premiums
Supporters of PAYD proposals in California contend that restrictions on non-economic damages,
coupled with the elimination of uninsured motorists and therefore UM and UIM coverage, will
lower average insurance premiums. In this section we present some data on relative insurance
costs, type of liability system, and number of uninsured drivers by state. Several other factors,
such as minimum compulsory coverage levels, assigned risk plans for risky drivers, and other
32. Department of Taxation, the Hawaii Independent Insurance Agents Association, Hawaii Transportation Association.
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state policies, such as drunk driving laws, the legal drinking age, and speed limits, can affect the
frequency and/or severity of vehicle accidents, and therefore state average insurance premiums.
After we examine the current situation in the states, we summarize the results of several studies on
the effect of introducing a no-fault liability system and compulsory insurance requirements on
average insurance premiums.
2.3.1. State liability systems and minimum compulsory liability coverage levels
Every state has financial responsibility laws that require drivers to be able to pay for a specified
amount of medical expenses and property damage they may inflict on others by their driving. ’
Drivers can fulfill their legal responsibility with a minimum liability insurance policy, by posting
bond for the same amount, or by depositing cash or securities in the same amount. Financial
responsibility laws by themselves do not require motorists to buy insurance before their cars can be
registered, and they do not make it a criminal offense to drive without insurance. Thirty-nine states
and DC do require the purchase of insurance coverage, whether it be first party (PIP) or third party
@I, PD and Mp) coverage, to cover the amount specified in their financial responsibility laws (see
Table 2). Compulsory insurance laws often require drivers to present proof of insurance before
they are allowed to register their car, and make it illegal to drive without such proof. Most states,
however, require only that people sign affidavits attesting that they have, and will maintain,
liability coverage.
Minimum coverage for bodily injury ranges from $20,000 for all people injured, limited to
$lO,OOO per person, (in several states) to $100,000, limited to $50,000 per person (in Alaska).
Minimum coverage for property damage ranges from $5,000 to $25,000. Table 2 also shows the
minimum coverage levels of each state, as well as which states require insurance coverage for these
levels.33 UM coverage is not compulsory in any state.34

Impact on Insurance Provision

Impact on Insurance Provision
Reform of state insurance systems has fueled much of the state-level interest in PAYD to date. In
this section we examine how PAYD systems would impact the provision of insurance. We first
provide some background on the different insurance systems the states currently have in place, and
describe the types of insurance coverage provided under each system. Next, we summarize five
PAYD systems that have been proposed in California recently, as well as proposals made in other
states. We then present data on the current costs of insurance by state, and look at how PAYD
systems might reduce average insurance premiums. Finally, we examine two concerns that critics
of PAYD have raised: 1) is annual miles driven, or its proxy, gallons of gasoline consumed, a
reliable predictor of accident. frequency/severity? and 2) will PAYD reduce overall automotive
safety by encouraging teenagers, who tend to be the riskiest drivers, to drive more?
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2.1. Background on Insurance Issues
Automotive insurance reform has long been an issue in many states. In most states, medical costs
and property damages are paid by the insurance company that covers the driver who is judged to be
at fault in an accident. Typically, these systems allow victims to sue to recover damages for “pain
and suffering”, or “non-economic losses”, which are in addition to compensation for any property
damage, hospitalization, and health care costs. Insurance companies recover any non-economic
damages they pay out by raising insurance premiums on all drivers that they cover. For years
critics of auto insurance have proposed limiting liability damages as a means of reducing insurance
premiums. These proposals generally consisted of replacing current systems with no-fault
insurance systems; under no-fault, injured drivers are covered by their own insurance company,
rather than the company of the at-fault driver. Although several states have adopted variations of
no-fault auto insurance, currently none of these systems cap the amount of damages victims can
sue for.