Industry response to auto reform: Spotlight on fraud centre

Ontario’s move to establish a new Serious Fraud Office (SFO), which would help crack down on auto insurance fraud, is widely — if cautiously — praised as a step in the right direction by the province’s property and casualty industry.

“In theory and in design it’s the right step,” said Gordon Rasbach, vice president of fraud management at Aviva Canada. “What that translates to in practice remains to be seen.”

The SFO is one measure among many proposed in the Ontario Fair Auto Insurance Plan. The government’s seven-point plan follows some of its direction from the David Marshall Report, Fair Benefits Fairly Delivered: A Review of the Auto Insurance System in Ontario, released last April.

Ontario’s plan highlights reforms such as working with the Law Society of Upper Canada to ensure contingency fees are fair and transparent; a FSCO-directed risk factor review; implementing standard treatment plans for common collisions; creating independent examination centres for assessment in serious collisions and resolving diagnosis disputes; and providing FSRA with rule-making authority.

Insurance Bureau of Canada (IBC) and the Insurance Brokers Association of Ontario (IBAO) both committed to working with the government as its plan gets implemented.

On the establishment of SFO, IBC told Canadian Underwriter that “having both investigative and prosecutorial mandate is welcome and will be a strong step to fighting insurance fraud.”

Due next spring, the SFO would include a dedicated team of investigators and prosecutors working on complex and large-scale fraud cases, including those related to auto insurance.

Insurance fraud cases, such as staged collisions and fraudulent health provider claims, tend to be “too complicated to be tried by judges and crowns today without taking up an inordinate amount of resources,” Ontario Safety League president and CEO Brian Patterson said in an interview. Instead, prosecutors often leave it to insurers themselves to file a civil lawsuit.

“There are very few organized crime guys who are threatened by the likelihood of getting [an insurer’s] civil action [launched] against a numbered company that no longer exists,” Patterson said. “It’s when they put the handcuffs on, when they are on bail conditions, and when they are facing the real likelihood of incarceration — that’s when people pay attention.”

When deciding which cases to pursue, the SFO would consider things like the dollar value and duration of the fraud, the presence of organized crime and the level of sophistication, a Ministry of the Attorney General spokesperson said Tuesday.

“I would like to see 15 or 20 convictions a year of these,” Patterson said, adding some fraud schemes let crooks steal so much money that the miscreants “should be doing five- or 10-year sentences in a penitentiary.”

Fraud costs the industry about $2 billion a year, Aviva Canada estimated in a report released in November. “It means we don’t have money in the system for some people who really need it for injuries,” Patterson said Tuesday.

Every Ontario auto insurer with an investigation unit “probably generates five or 10 cases a very year” that could potentially be handed off for criminal prosecution, Patterson said.

“They simply need the government to provide the court room to try it in and a crown prosecutor to represents the public…and the administration to get the file moved through the system,” Patterson said. “It’s never a case of not having an accused or not having evidence or not having reliable witnesses.”