Auto body shop scams could be hiking insurance costs, says industry expert

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Auto body shop scams could be hiking insurance costs, says industry expert

A recent investigation by a national insurance company showed consumers in Ontario could be footing the bill for auto body scams, and a St. John's cab company manager says he's found evidence of the scams in Newfoundland and Labrador.

"I suspect that consumers out there don't know about this," he said. 

"There's consumers in this province, particularly for automobile, that have seen [insurance] increases of about 13 per cent this year, and that's outside the taxi industry."

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While doing a bit of digging, George Murphy got a list of all the claims that had ever been filed on his insurance policy. On that list was a charge of $1,143 for "glass breakage," he told the St. John's Morning Show.

The only glass breakage he could recall was a windshield replacement for his wife's car. 

He phoned around to ask auto body shops how much a windshield replacement would normally cost, he said, and on average, they told him it'd be about $350.

"Huge difference," he said.

"When we go to get our windshields replaced, we never see that. We pay our $100 deductible and we go off on our merry, happy way."

Shops caught on video doing damage

Gordon Rasbach, vice-president of fraud management at Aviva Canada, wasn't surprised by Murphy's findings. In early March, Aviva released the results of an investigation in which Aviva purchased 10 cars, roughed them up and then sent them to auto body shops in Ontario to be fixed.

When investigators compared the costs of the actual repairs needed with what the shops invoiced the insurance company, they found a large discrepancy: total estimates of the damages were around $30,000, but repair shops invoiced Aviva for double that amount, he said.

"We found that in 90 per cent of the causes there was deliberate fraud," he said.

Some shops would replace parts with used pieces, but claim they'd used new ones, and some would invoice for work that was never done, he said. 

"In some instances we caught on video the body shops doing additional deliberate damage [to the cars]," he said.

"What happened didn't shock me, [but] the extent of which it happened — I have to admit, it startled me."

Systemic issue

The practice extends well beyond Ontario, said Dan Service, national director of investigative services for the Insurance Bureau of Canada, and the costs definitely come out of consumers' pockets.

"It ends up in higher insurance premiums for everyone," he said.

It also extends beyond cars. Many types of insurance, from health care to property insurance, are susceptible to scams and overcharging, he said.

And there's no quick fix for it, either, he said. Insurance companies have to put their own money into investigating a claim it suspects to be fraudulent, and those investigations delay coverage for customers, he said.

"If they have to choose between looking at a claim that might be somewhat suspect and making sure that their customers are taken care of, they often will choose the second course of action."

Consumers can help by keeping an eye on the claims made to their insurance companies. 

"The more that people are aware that this type of behaviour happens, the more attention they pay to the bills that are submitted on their behalf, the less opportunity there is for this type of fraud to be undertaken," Service said.