The Truth About Fraud Allegations In Personal Injury Claims
With a provincial election ramping up in Ontario, a campaign issue that seems to percolate to the surface every election year is high auto insurance premiums. As you may recall the current Ontario government had previously promised a rate reduction in premiums of up to 15% – this reduction never materialized. Instead what Ontarians received was a drastic reduction in the benefits they get for their premiums. Now Ontarians actually have to pay more, not less, to get the same coverages they used to get before. Insurer’s will have the public believe that the high premiums are because of fraud. In this blog we examine the problems with how insurance companies define “fraud” as it relates to personal injury claims.
Insurance companies in Ontario are extremely profitable – in fact according to a recent report by the Schulich School of Business, Ontario’s insurance regulator, the Financial Services Commission of Ontario (FSCO) isn’t putting an adequate cap on auto insurance profits and is over valuing the operational expenses of the industry. According to the Schulich report – FSCO’s failure to adequately control insurance profits has meant Ontarian’s have overpaid insurance premiums to the tune of 3.7 billion dollars between 2001 and 2014. As auto insurance industry profits grow, so does the industry’s influence with government, their ability to lobby for changes that are beneficial to their bottom line, and their ability to sway public opinion through strategic media campaigning in support of their agenda to increase profits.
As an example, the Insurance Bureau of Canada (IBC), Canada’s national lobby organization for the insurance industry, commissioned a report from KPMG to illustrate that fraud was a major factor in why premiums were so high. This report made its way around the media circuits and had its impact on the public – many people becoming furious that fraudsters are getting a free ride from their premiums. But a closer look at the report reveals that KPMG includes under the vast ambit of “fraud” any claims which the insurer pays more than what the company assesses the claim to be worth (an “inflated” legitimate claim). However, KPMG did not perform their own analysis of insurance claims to identify those that provide indications of “fraud”. As is common knowledge – insurers increase their profits by deliberately assigning low values to any reported claims. As personal injury lawyers our job is to make sure the insurance company pays what is fair, reasonable and required by law, rather than based on the insurance company’s own under-assessed value. According to the KPMG report only 6.8% of bodily injury claims fall within this ambit of “exaggerated” injury claims. The problem is that this percentage and the unjustified and overbroad definition of fraud means that people who fight for and receive objectively fair compensation might fall within the definition because the insurance company believes they’ve paid out too much on the claim. If out of 100% of bodily injury claims only 6.8% fall within this distorted definition, it does not accord with the public perception created in Ontario that auto insurance fraud is rampant.
The industry has been so successful in this lobby against “alleged fraud” that the latest proposed provincial reforms include the commission of a special fraud task force by the government. Insurer’s have convinced the government that the multi-billion-dollar, for-profit industry’s own fraud investigation efforts aren’t adequate and that Ontario taxpayers should fund this endeavour further. The group Fair Association of Victims for Accident Insurance Reform (FAIR) correctly points out if we are to accept that the Ontario auto insurance industry is being taken for a ride by “fraudsters lurking around every corner scamming billings from honest drivers … then we must also see that Ontario’s insurers were willing to lose an enormous amount of money and just simply bill the consumer for the loss rather than addressing the problem.”
In fact, the industry has persuaded the public that the reason premiums are high is because they are paying out a lot of money on claims –this couldn’t be further from the truth. The truth, as has been revealed by the recent Marshall Report and other independent reports, is that Ontario has the lowest claim rates in the country and that claim rates have steadily been declining for over a decade. The truth is that according to the Marshall Report, and even by the IBC’s own estimates, insurance companies are paying significantly more to assess and deny claims than the cost of treatment that accident victims are seeking. It is the insurers who spend hundreds of millions of dollars on medical reports to deny benefits that are contributing to increased premiums. Over 90,000 claims for accident benefits in Ontario were denied between 2010 and 2013.
The industry has persuaded the government and Ontarian’s that claims for whiplash and soft tissue injuries are so “exaggerated” that there needs to be a universal cap on treatment for muscle injuries to $3,500 regardless of a person’s medical or health history. They’ve persuaded the government that these people shouldn’t be allowed to seek compensation from the at-fault party, unless they can establish the injury is serious, permanent, important and exceeds a jury awarded claim value of more than $38,000 dollars for pain and suffering (pegged to inflation), which amount the insurance company gets to keep. These changes were brought in to law and are referred to as the deductible and threshold on motor vehicle accident law suits. If innocent accident victims try to seek justice in court and don’t surpass the deductible or meet the threshold, the insurance company will be awarded legal costs. This means they get a judgement against the innocent injury victim and the insurer can then take their house, their car and any other assets they have, and even garnish wages to satisfy the judgement for their legal fees.
They’ve also persuaded the government that average folks who get hurt in a car accident don’t need injury lawyers to help them get their benefits and that if the insurance company refuses to pay those benefits that victims don’t need access to the courts to deal with the dispute, the dispute can go before a specialized tribunal, and no costs will be awarded even if the tribunal determines the insurance company was wrong in denying the injury victim their benefits.
The truth is that the system has now become so skewed in favour of insurers and so complicated with numerous complex insurance forms to fill out after a car accident that legal advice is required even for a minor injury, otherwise inevitably an injured person will have their claim denied and their injuries minimized and dismissed – or worse be labeled as an “exaggerator” or a “fraudster”. As FAIR points out – Accident victims have become so conscious about being vilified as a fraudster it has created a climate of distrust between claimants and insurers. Injury victims have no choice but to seek representation from injury lawyers to ensure they are protected from being labelled as a malingerer.
How does an average injury victim who is coping day to day with their injuries and pain, have a fighting chance at fair compensation when their own government seems intent on slashing compensation as the only way to tackle high premiums while insurers run away with record profits? It’s a good question to ask those running for Ontario’s public office.
To take a stand for your rights as a car insurance consumer in Ontario or for more information on this issue check out The Truth About Insurance.
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 The report commissioned by the IBC titled KPMG Forensic Report, June 13, 2012 doesn’t appear to be readily available to the public, but it is clear that the Ontario government is making policy decisions based on this report.
 Mr. Liam M. McFarlane, Ernst & Young LLP Insurance and Actuarial Advisory Services, Ontario Automobile Insurance Anti-Fraud Task Force – Review of Research Related to the Nature and Scope of Automobile Insurance Fraud in Ontario, October 5, 2012.