Insurance fraud in Ontario is the governments fault

Published: September 27, 2015

Updated: July 24, 2018

Author: Luke Jones

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Ontario drivers have to pay the highest average auto insurance premiums in Canada, with prices as much as 47% more than some other provinces in the country. Much of this disparity has been attributed to the high auto insurance fraud rate in the country, which is at epidemic levels according to some sources.

However, while the insurance companies may present an easy target when looking for someone to blame for this fraud, it is actually to the government we should be laying our crosshairs. Of course, firstly we should be going after the drivers and consumers who perpetrate this high rate of fraud in Canada’s most populous region. These fraudsters have exploited the system though, and it is a system the government has not done enough to protect.

For a start, the current liberal government in Ontario had promised to lower the price of auto insurance premiums by 15 per cent this year, following a pledge in 2013. The deadline to meet that pledge has come and gone, but premiums have only fallen by 6.46 per cent and indeed have only declined 5.1 per cent since 2001.

That year is considered the peak, when auto insurance on average in Ontario cost $1,501, so a 5.1 per cent decline in the proceeding 14 years has put the average rate at $1.425. Consider this takes into account the time before the current government took office it is hard to give them any credit for this decline, especially as their own pledge was missed.

Indeed, credit should be handed out sparingly regardless of who receives it, because while Ontario has seen a 5.1 per cent fall in auto insurance premiums, other provinces have performed better. The nearest is Alberta with a fall of 6.0 per cent, while other regions have really shown Ontario how it should be done. New Brunswick for example has cut its average premiums 37.5 per cent according to the Insurance Bureau of Canada.

There were 85,000 accident claims in Canada during 2014, a staggering amount from a driving population of 9.6 million. The average bodily injury claim stood at $143,630, with the average payout standing at $31,785. To put that into perspective, Alberta’s average bodily injury claim was $12,785, while the average payment amounted to $3,766 in 2014.

Yes, the higher population of Ontario suggests that there will be more accidents and therefor more claims, but still insurance companies describe the numbers as staggering. Companies in Ontario are paying up to 300 per cent more per accident than they would have to in another province, in some cases.

The reason for this huge disparity in the figure is because of auto insurance fraud, something that Ontario and the Greater Toronto Area (GTA) is famed for. The Ontario Automobile Insurance Anti-Fraud Task Force, headed by Fred Gorbet, former federal deputy finance minister, now CIT Chair in Financial Services at the Schulich School of Business, York University highlighted this in 2012.

The Task Force found that the annual cost of fraud in 2010 had cost companies within Ontario between $768 million and $1.56 billion, and the number is thought to have been steady since. If the province eliminated fraud entirely the average driver would be paying between $116 to $236 less for their annual premium. Of course removing fraud from the equation entirely is utopic, but there is clear evidence to suggest that reducing auto insurance fraud would see average premiums decline further.

Insurance firms who provide coverage are desperate for reforms to really tackle the issue of fraud, it is them (so often considered the devil by the consumer) who are being hit the most, having to cough up money for no reason. The government on the other hand made an ambitious pledge and missed it by a large distance two years later.

Ontario has one of the most regulated insurance industries in Canada and indeed the world, something the government is proud of. However, if those in office had spent more time focusing on clamping down on auto insurance fraud they may have found it easier to reach their goal of a 15 per cent decline in premiums by 2015.