Immobilizing Auto Theft

It is a well-known fact the Number 1 claim issue plaguing insurance companies today relates to accident benefits. Ontario’s latest auto insurance reforms have been designed to help control rising costs related to an ever-increasing number of claims and incidents of fraud. This is a large issue requiring ongoing attention, but it tends to dwarf another equally important concern in the industry today – namely, theft. Recent statistics rank Canada fifth out of seventeen countries when it comes to the highest rates of auto theft in the world.

Vehicle theft is a problem that tends to receive little fanfare, yet losses across Canada are astronomical. In 2009, auto theft cost Canadian insurers $540 million. If you factor in ancillary costs related to theft – for example, emergency response, court, policing, legal and out-of-pocket expenses such as deductibles – the total cost of auto theft each year in Canada approaches $1 billion.

Auto theft has always been considered a victimless crime. However, the media are full of stories that indicate the opposite. Stolen vehicles are used for a whole gamut of unrelated crimes such as home invasions, break-and-enter and the funding of organized and terrorist groups worldwide, to name a few.

Many incidents of car theft now end in police chases, often causing damage to property as well as injury and loss of life. Forty people die and 65 people are injured each year as a result of auto theft in Canada.

Anti-Theft Solutions

Standard 114 of Canada’s Motor Vehicle Safety Act was implemented in November of 2007 to enhance the security of cars, thereby reducing theft. Factory installed immobilizers were and still are the mandate for all vehicles entering Canada. All manufacturers have complied. However, car theft has not disappeared. Although the standard is welcome, it does not mandate effective theft deterrents for heavy/farm equipment or trucks and cargo. These types of vehicles have sizeable costs associated with them when claims are payable.

Some insurers have been proactive, demanding the installation of theft deterrents on vehicles when the client’s claims have been excessive. Such theft deterrents include GPS tracking systems, which are effective in theft recovery but not in theft prevention. A stolen vehicle with GPS tracking can still end up as an insurance claim if it’s not recovered. Even when recovered, stolen vehicles could be damaged or stripped, resulting in a claim related to repair or write off.

Many simple anti-theft systems exist today in the marketplace. Solutions range from mechanical wheel boots and clubs to more high-tech GPS tracking and car alarm systems. Although they all provide a measure of security, they do not stop professional thieves. Organized rings walk the streets of most cities with shopping lists in hand, stalking innocent vehicle owners. These professionals wait for the right opportunity to steal someone’s car and ship it to paying customers around the world. Many car thefts occur right in the driveway of the owner. The violation of having one’s car stolen is compounded by fear for one’s safety, since the thief now knows where the owner lives.

Preventing Theft

A relatively simple and cost-effective solution exists to prevent auto theft. Approved, ULC-certified, Level 3 security immobilizers are being used around the world to stop vehicle theft. Factory-installed immobilizers isolate the ignition; approved aftermarket systems use multi-circuit control. Coupled with tamper-proof construction, all black wiring and multi-code RFID technology, these units are the first line of defence for an owner who is serious about securing his or her vehicle.

Many insurance companies recognize the value of this type of system: it passively arms and disarms with no input from the driver. Approved immobilizers are setting above-average standards for quality, reliability and effectiveness. Consequently, many insurance companies now offer discounts to clients who install such a device.

In 2007, Manitoba became the only province that enforced Standard 114. Manitoba Public Insurance allocated $55 million in funding to implement an immobilization program. The government’s focus was on the Top 10 most-at-risk vehicles; nevertheless, immobilization was made available to anyone concerned about the security of his or her vehicle. Manitoba was successful in reducing auto theft significantly. Theft reductions of up to 75% were recorded in Winnipeg alone.

Similar or better success could happen in Ontario and the rest of the provinces with the right incentives. Insurance companies can be proactive by encouraging clients to install approved immobilizers. As in Manitoba, initial attention should be paid to vehicles that have the highest claims for theft. Providing a financial incentive through a premium discount could provide a tipping point for consumers. Financial benefits to insurance companies are obvious, since theft claims can become less common.

If you compare accident benefits and theft claims, accident benefit claims are indeed the greater issue of the two facing insurance companies. However, when comparing effective solutions to each, vehicle theft is easier to control when proper immobilization is implemented. Furthermore, effective immobilization for vehicles does not interfere with an insurance company’s accident benefit cost reduction program; rather, it complements this initiative.