CICMA/CIAA Joint Conference:

As independent and company adjusters joined together in Toronto for a recent CICMA/CIAA conference, auto claims issues were front and center. From the passage of Bill-198 in Ontario to auto theft, a common message came out of the discussions: the industry needs to share information if it has any hope of cracking down on fraud and other abuses of the system that are sending insurers’ loss ratios out of control.

The story of the insurance industry’s challenges in Ontario auto are not news – rising loss ratios that last year topped 90%, rampant fraud, increasing theft trends – have all combined to make this, the largest market in the country, unprofitable for insurers. The result has been rising premiums, insurers exiting marketplaces, and most recently the government acting in the form of new legislation.

However, Bill-198, an omnibus bill, which includes provisions to fight fraud in the healthcare end of auto insurance, is just the beginning. At the recent Joint Conference hosted by the Canadian Insurance Claims Managers’ Association (CICMA) and Canadian Independent Adjusters’ Association (CIAA), speakers made a call for cooperation in the face of fraud and theft.

“There is a sense that we get this thing right for Ontario drivers, once and for all,” says Insurance Bureau of Canada (IBC) president and CEO Stan Griffin of the will to implement Bill-198. Overall, the industry is pleased with the provisions, specifically limits on the role of paralegals, often viewed as a source of fraud and an impediment to thorough claims investigation.

Griffin notes there is a trade-off for insurers with the implementation of a pre-approved framework for minor injuries, where the fraud problem is greatest, and increased tort access for serious impairments as a result of auto accidents. In this respect, Philippa Gower Samworth, a senior partner with Dutton, Brock, MacIntyre & Collier, points out that under Bill-59, paralegals brought insurers and lawyers to their knees with a multiplicity of forms, plans, assessments, and the threat of costly mediation. She muses to whether the new legislation will become reality with the threat of an impending election call in Ontario. And, she adds, there is a great deal of room for interpretation in devising regulations under the new provisions – such as controls on what preconditions paralegals might have to meet in order to act as a representative. And, there may be an end-run for paralegals, who instead of threatening arbitration, will take claims to small claims court, where no such preconditions have to be met.

Griffin points out that the new Ontario legislation is “a work in progress”, and that real change will come with regulations to support it. “The devil is in the details, in fact, for consumers right now, the devil is in the delay.”

In addition, insurers continue to fret over what was not included in the legislation – namely a lack of change to the cumbersome rate filing system, and no movement on collateral rating to put group insurers on a level playing-field, Griffin notes.

TARGETING “RINGS”

Insurers acting through the IBC are targeting auto theft and fraud rings, such as “staged accident” operators. AB fraud is currently costing a “staggering” $327 million annually in Ontario alone, notes Richard Dubin, vice president of the IBC’s Investigative Services Division (ISD). And, in Canada, a vehicle is stolen every three minutes, or 470 per day.

For thieves, “the reward is extremely high, there are high profits, and the risks are very low. It’s rare to see these individuals in jail,” he adds.

Part of the IBC’s strategy is to work with other agencies, such as the police, but also international authorities. For example, the signing of “mutual assistance treaties” led to the recovery of a haul of stolen vehicles from Hong Kong. They are also lobbying the attorney general of Ontario for stiffer penalties and specific Criminal Code recognition of auto theft and insurance fraud crimes. “Right now, these people [fraudsters, thieves] are getting off lightly” with plea bargains and light sentences, Dubin observes.

The IBC is also lobbying for special prosecutors for insurance fraud, adds Robert Whitman, director of IBC’s “ring investigations”. He says there have been encouraging signs from the Financial Services Commission of Ontario (FSCO) lately, including the recent charge against a paralegal for using false information without the claimant’s knowledge.

That said, insurers need to become more vigilant in their own claim investigations, comments Armie Francescut, vice president of insurance business services group, CGI. Currently only 10% of claims are pre-screened, he notes.

EMERGING ROLES

Another relationship that is changing is that between insurers and Designated Assessment Centers (DACs) and Collision Reporting Centers (CRCs). The latter can act as a stop-gap between tow trucks and collision repair shops, says Bob Gutwein, vice president of sales and operations for Accident Support Services International. CRCs also have a role to play in catching uninsured drivers, flagging deployed airbags and the early identification of suspicious accidents, he adds.

Dubin and Whitman believe the IBC should strengthen its relationship with CRCs. “The [CRC is the] first line of defense against fraud, the first stage of investigating,” says Dubin.

Under the new legislation, the role of DACs has heightened. Samworth, who is part of the DAC Committee, was surprised to see DACs being used to “assess assessments”, to decide if a claimant will go through the pre-approved framework as a minor injury case or not, and to do so in a very short period of time (three to seven days for a “fast-track” DAC). “My perception is that DACs are here to stay…and I think you may see even more [responsibility] given to the DACs.”

The increased role of these players in the claims process, and the need to crack down on fraud, means an increased need for information sharing. For example, even with the decision to make vehicle pre-inspection a choice for insurers rather than a requirement, most carriers are continuing with the program, notes Greg MuCutcheon, director of business development, insurance solutions and services for CGI. “The bulk of our industry has come out and said they are committed to this program.” But, he stresses, there is further need for cooperation and data sharing within the industry and with outside sources such as inspectors.

By failing to share information, insurers give fraudsters the advantage, notes Francescut. “Many insurers feel they can be more competitive by hoarding their information. As a result, fraudsters understand your business as well or maybe even better than you do.”