MAIN HEADING: Auto Insurance Anti-Fraud Task Force - Jurisdictional scan of consumer engagement and education strategies to combat autoinsurance fraud

The following is the Executive Summary of Deloitte’s “Jurisdictional scan of consumer engagement and education strategies to combat auto insurance fraud.”

2 Executive summary

2.1 Background

  1. The Task Force was appointed by the Ministry in July 2011, with two key objectives:
    1. Determine the nature and scope of auto insurance fraud in Ontario
    2. Make recommendations on three focus areas:
      1. Prevention, detection, investigation and enforcement
      2. Regulatory practices in the auto insurance system
      3. Consumer engagement and education
  2. For the Task Force to meet all of its objectives, including making recommendations regarding consumer engagement and education, the Ministry, in consultation with the Task Force, has developed a research agenda. The research agenda includes the need to identify effective approaches to consumer engagement and education in other jurisdictions.
  3. This report presents the research results of the third focus area: a jurisdictional scan of consumer engagement and education strategies to combat auto insurance fraud. The research results of a jurisdictional scans that pertain to the first and second focus areas are presented in separate reports.

2.2 Scope of Review

  1. The Task Force, in conjunction with the CEE Working Group and the Ministry, defined the scope of the research (see Section 3 – "Scope of the research" for details). This entailed determining the jurisdictions to research as well as the questions to be answered.

2.2.1 Jurisdictions approved by the Task Force

  1. This report summarizes the results of a search of publicly available information on specific features of consumer engagement and education strategies to combat auto insurance fraud across four jurisdictions: Alberta, Florida, New York and the United Kingdom. These jurisdictions were selected by the Task Force for their potential to generate insights that may be applicable to Ontario based on the expected relevance, comparability and availability of information.

2.2.2 Five questions asked by the Task Force

  1. Communication with consumers at key learning moments
    1. With the objective of preventing or deterring auto insurance fraud, what are the opportunities and approaches used to engage and educate consumers at key learning moments and what are the considerations that are likely to make these most effective? Specifically consider the following key learning moments:
      1. When a driver's license is received or renewed
      2. When an auto insurance policy is purchased or renewed
      3. When a vehicle license plate sticker is received or renewed
      4. When an automobile collision occurs
      5. When a collision is reported
      6. When an auto insurance claim is made
  2. Educational materials for personal injury claimants
    1. What are effective approaches and factors to consider when providing educational material to help auto insurance claimants understand the normal phases of recovery after specific types of injuries and gauge whether proposed methods of treatment will be useful?
  3. Incentives for whistleblowing
    1. What practices are used and to what extent, to incentivize whistleblowing by consumers?
    2. What are the factors involved in considering which practices are more effective?
  4. Consumer engagement in the insurance purchase process
    1. What are effective approaches to deterring fraud through providing information that will make consumers more active in their auto insurance purchasing decisions?
  5. Other successful consumer engagement and education initiatives
    1. What other successful consumer engagement and education initiatives are aimed at auto insurance fraud? What are the key factors that make these approaches potentially more effective?
    2. The report has been structured, where practical, to align with one or more of the three types of fraud identified in the interim report issued by the Task Force in December 2011; namely opportunistic, premeditated and organized fraud1.
    3. This report focuses on fraudulent accident benefit claims, in particular, personal injury claims fraud in relation to consumer engagement and education.

2.3 Effectiveness of strategies and approaches

  1. On conducting the jurisdictional scan of consumer engagement and education strategies to combat auto insurance fraud, various strategies and approaches were found. However, there is limited or minimal information and statistics that would allow a reader to correlate how a specific approach or strategy actual impacts the cost of auto insurance fraud and abuse. As such, further research would be needed to reach conclusions on effectiveness.
  2. Professional judgment has been exercised to identify the online sources to search. Electronic key word searches were based on the five questions in scope and the availability of public data and information authored by third parties.

2.4 Key findings– Alberta

2.4.1 Overview of the auto insurance industry

  1. Auto insurance in Alberta is provided by almost 70 private companies. Third-party auto insurance is compulsory, together with other mandatory benefits such as property damage, bodily injury and disability income and death benefits. The provincial government determines the mandatory benefits included in auto insurance products. Furthermore, Alberta's auto insurance system has a minor injury cap that reduced the level of coverage and related insured losses.
  2. The Alberta Insurance Council is the primary auto insurance regulator and the Alberta Insurance Rate Board (AIRB) regulates premium levels for basic coverage. Furthermore, the Insurance Bureau of Canada (IBC) provides investigative services focused on organized crime.

2.4.2 Communication at key learning moments

  1. Alberta uses a number of key learning moments to engage and educate consumers. In particular, when an auto insurance policy is purchased or renewed, the AIRB provides information related to the purchase of coverage. The application form to purchase a new automobile policy includes consent to share the information provided to prevent and detect fraud.
  2. Furthermore, when a collision occurs, the government, through its website, provides information to claimants on what to do. When a collision is reported, should the combined damage to the vehicles involved exceed CDN$2000, parties must attend a police station and file a collision report form. There are also procedures for consumers on "What to do after a collision."

2.4.3 Educational materials for personal injury claimants

  1. Alberta employs different approaches to ensure that personal injury claimants receive educational materials. The Diagnostic and Treatment Protocols Regulation and the Alberta Minor Injury Regulation prescribe rules and protocols related to minor injury. Moreover, the "Notice of Loss and Proof of Claim Form" describes the initial claims process. The form also highlights that the insurance provider is responsible for informing patients of the benefits they are entitled to receive.

2.4.4 Incentives for whistleblowing

  1. There were no legislative provisions or financial incentives identified for whistleblowing as it relates specifically to auto insurance fraud in Alberta. However, Crime Stoppers, a community, media and police co-operative program, is available to residents and does provide financial incentives for anonymous reporting of suspicions of potential crime to the police.

2.4.5 Consumer engagement in the insurance purchase process

  1. The Alberta Insurance Council (AIC), through its website, provides current information, posts consumer tips and advisory notices and monitors contacts. The AIC also provides detailed information on the insurance providers, including the type of insurance they are allowed to offer and whether or not they have been subjected to any disciplinary actions. Finally, the AIC maintains lists of non-renewed agents, brokers, adjusters and agencies/firms as well as a list of all the insurance companies authorized to conduct business in the province.

2.4.6 Other successful consumer engagement and education initiatives

  1. The AIC focuses on affordability of insurance and controlling overall insurance costs without an articulated auto insurance anti-fraud strategy.
    1. One feature of the strategy is the role of the Alberta Auto Insurance Rate Board, which provides consumers with information relating to the purchase of coverage, accessing coverage and the types of coverage available. A consumer representative on the auto insurance rate board solicits feedback from consumers on problems in purchasing insurance at appropriate premium levels. These results are reflected in an annual survey produced as part of an annual rate review.
    2. Another key feature is regulations establishing protocols governing the diagnosis and treatment of personal injury claimants. These protocols govern the interaction by healthcare providers with consumers and aim to control the costs of assessment and treatment.
  2. Other government departments, through broad fraud awareness initiatives and interactions with customers, seek to prevent identify theft at vulnerable moments such as driver licensing, vehicle registration and renewals.

2.5 Key Findings –Florida

2.4.1 Overview of the auto insurance industry

  1. The State of Florida (Florida) has a no-fault auto insurance system that requires minimum auto insurance for third party property damage (USD$10,000) as well as personal injury protection (USD$10,000 per person and USD$20,000 per incident) irrespective of a driver's fault in an accident.
  2. In Florida, two state-appointed offices regulate and enforce auto insurance fraud. The Department of Financial Services (DFS) is the primary regulator involved with auto insurance fraud. The DFS Division of Insurance Fraud is the state's fraud insurance bureau. In its role, the Division of Insurance Fraud functions as a law enforcement agency, investigates suspected insurance and financial fraud, issues public information announcements and provides training for insurers to help deter and combat fraud. The Office of Insurance Regulation (OIR) is responsible for regulation, compliance and enforcement of statues related to the business of insurance.
  3. The Office of the Insurance Consumer Advocate is committed to finding solutions for insurance issues facing Floridians. It calls attention to questionable insurance practices, promotes a viable insurance market that is responsive to the needs of Florida's diverse population and assures that rates are fair and justified.
  4. At a national level in the United States of America, there are three key organizations engaged in consumer engagement, namely:
    1. The National Insurance Crime Bureau (NICB), which is a not-for-profit industry association focused on medical fraud;
    2. The FBI, which focuses on organized crime; and
    3. The US Attorney General, which plays a prosecutorial role.

2.5.2 Communication at key learning moments

  1. Florida uses a number of key learning moments to engage and educate consumers. In particular, when a driver's license is received or renewed, information is provided in relation to driver license fraud and identity theft. The Drivers training manual also includes content regarding identity theft. Furthermore, when an automobile collision occurs, immediate accident reporting is required to local law enforcement if the car accident resulted in injuries, death or vehicle/property damage exceeds USD$500. Moreover, when a collision is reported, police crash reports must list names and addresses of all passengers. Finally, when an auto insurance claim is made, consumers sign-off on the acknowledgement of the warning of criminal liability for fraud.

2.5.3 Educational materials for personal injury claimants

  1. Florida employs different channels to educate and engage consumers. Channels employed include billboards, brochures, bus posters, mall kiosks, newspapers, newsletters, radio, social media, television and websites.

2.5.4 Incentives for whistleblowing

  1. The Florida False Claims Act allows whistleblowers to bring a lawsuit in the name of the State of Florida where a wrongdoer engages in conduct that defrauds the state or local governments of taxpayer dollars. The law is a broad-reaching statute designed to address an array of wrongdoing (e.g., from healthcare fraud to fraud involving any type of government contract or business relationship involving state or local money).
  2. Additionally, Florida encourages whistleblowing by offering a guarantee of anonymity and a reward up to USD$25,000 for information that directly leads to an arrest and conviction in an insurance fraud scheme.

2.5.5 Consumer engagement in the insurance purchase process

  1. Florida uses a number of strategies, namely:
    1. Fraud prevention tips to consumers (Division of Insurance Fraud Insurance Consumer Tips);
    2. Help consumers make informed insurance and financial decisions by allowing consumers to call or visit online regarding any insurance or financial issue;
    3. Provide consumer guides to help consumers understand various lines of insurance and tools for selecting appropriate coverage;
    4. Maintain an insurance library with information on specific insurance questions; and
    5. Provide consumers with information on how to select an insurance company and agent, as well as provide information on complaints against carriers.

2.5.6 Other successful consumer engagement and education initiatives

  1. In Florida, different agencies collaborate in order to best mitigate the costs associated with auto insurance fraud. For instance, the Personal Injury Protection (PIP) working group, which is administered by The Office of the Insurance Consumer Advocate, comprises of legislative and executive branch representatives, insurance and medical industry representatives and consumer advocacy.
  2. Moreover, insurance professionals train others industry participants to enhance awareness and ability to detect fraud. For instance, The Fraud Alert Team, a not-for-profit group, holds a bi-monthly class to help increase insurance fraud awareness for insurance agents. The Fraud Alert Team also trains law enforcement officers to help enhance their ability to identify signs indicative of fraudulent activities at the scene of an accident.

2.6 Key Findings –New York

2.6.1 Overview of the auto insurance industry

  1. The State of New York (New York) is a highly competitive market with hundreds of providers offering auto insurance coverage. New York has a no-fault system, where no-fault insurance is mandatory to provide up to USD$50,000 in personal injury protection benefits.
  2. The Department of Financial Services (DFS) is the primary insurance regulator and administers the Insurance Fraud Bureau, which is a law enforcement agency responsible for preventing, detecting, investigating and referring cases for prosecution. Furthermore, the New York State Division of Criminal Justice Services plays an active role in the enforcement of fraud, including the establishment of a state-wide plan specifically addressing auto insurance fraud.
  3. The DFS has also established a set of regulatory requirements for insurers to develop fraud prevention plans and public awareness programs. These requirements include:
    1. All auto insurers that write at least 3000 auto insurance policies annually must submit to the DFS a fraud prevention plan;
    2. All insurers must develop a public awareness program focused on the cost and frequency of insurance fraud and methods by which the public can assist in the prevention; and
    3. Programs must be geared to reach wider audiences than just the insurers' policyholders and applicants.

2.6.2 Communication at key learning moments

  1. New York uses a number of key learning moments to engage and educate consumers. In particular, when a driver's license is received or renewed, all applicants must sign acknowledgment of explicit consequences of making false statement on their applications. Furthermore, when an auto insurance policy is purchased or renewed, explicit warning language pertaining to fraudulent acts is included on all applications. Moreover, when a vehicle license plate sticker is received or renewed, applicants must sign acknowledgment of explicit consequences of making false statements on the registration renewal form.

2.6.3 Educational materials for personal injury claimants

  1. The DFS has established a regulatory requirement for insurers to develop public awareness programs that are geared to reach wider audiences than just their policyholders and applicants.
  2. New York employs different channels to educate and engage consumers which include billboards, envelope stuffers, media tours, newspapers, newsletters, radio, social media, television and websites.

2.6.4 Incentives for whistleblowing

  1. The New York False Claims Act allows whistleblowers to bring suit in the name of New York where a wrongdoer, whether it be an individual or a legal entity, engages in conduct that defrauds the state or local governments of taxpayer dollars. The New York False Claims Act is a broad-reaching statute designed to address an array of wrongdoing (e.g., from healthcare fraud to fraud involving any type of government contract or business relationship involving state or local money).
  2. Additionally, New York encourages whistleblowing by offering a guarantee of anonymity and cash reward of up to 15% (but not exceeding USD$25,000) of the proceeds of the action or settlement of the claim.
  3. In New York, consumers have different options available to report fraud, including:
    1. The National Insurance Crime Bureau (NICB), which is a not-for-profit national industry association focused on medical fraud; and
    2. DFS Insurance Fraud Bureau, through the hotline, fax or mail.

2.6.5 Consumer engagement in the insurance purchase process

  1. New York employs different strategies to engage consumers in the insurance purchase process. In particular, the DFS "Annual Ranking of Automobile Insurance Complaints" ranks 40 insurance companies or groups of companies by the number of automobile insurance complaints upheld against them as a percentage of their average New York State auto premium. Furthermore, the DFS publishes the "Consumer Guide to Automobile Insurance", which provides information on the auto insurance cycle from shopping for insurance to filling claims, process for disputes and reporting fraud.

2.6.6 Other successful consumer engagement and education initiatives

  1. In New York, different agencies collaborate in order to best mitigate the cost of auto insurance fraud. For instance, the Insurance Fraud Bureau works closely with federal, state and local law enforcement agencies to investigate and prosecute fraud in the healthcare sector. Furthermore, the Insurance Fraud Bureau is a member of the FBI New York Health Care Fraud Task Force, a multi-agency task force established in 2007 to address healthcare fraud in the New York metropolitan area. The Insurance Fraud Bureau is also a member of several task forces and working groups designed to foster cooperation and communication among the many agencies involved in combating healthcare fraud.
  2. Moreover, the Insurance Fraud Bureau provides training to local law enforcement and fire departments, prosecutors, insurers and community groups throughout the year. In 2010, the Insurance Fraud Bureau provided training to 26 groups that included 1971 participants.

2.7 Key Findings –The United Kingdom

2.7.1 Overview of the auto insurance industry

  1. The insurance industry in the United Kingdom is the third largest in the world, with hundreds of insurers operating in a highly competitive and comparatively deregulated market. While auto insurance coverage is mandatory for all drivers, the U.K. system operates under a fault-based scheme. Under this system, the insurer of the party who was at fault in an accident is responsible for the cost of the vehicle repair, providing a replacement vehicle, damages for personal injury, legal costs and any other costs associated with the claim.
  2. The primary regulator is the Financial Services Authority (FSA), a consolidated financial services sector regulator. As part of the European Union (EU), the U.K. market is also subject to EU directives where its EU participation may impact auto insurance fraud, directly or indirectly.
  3. The U.K. has an integrated national fraud strategy led by the National Fraud Authority (NFA), which is an executive agency of the Home Office. Furthermore, the Insurance Fraud Bureau (IFB) is a not-for-profit organization funded by the insurance industry and is focused on detecting and preventing organized and cross-industry insurance fraud. The Insurance Fraud Investigators Group (IFIG), which consists of insurers, investigators, loss adjusters, lawyers and law enforcement organizations, is authorized to disclose information for the purposes of preventing fraud. Finally, the European Anti-Fraud Office (OLAF) also has a mandate that includes a) supporting European Commission in developing and implementing fraud prevention and detection policies and b) combatting fraud mainly through an investigative function to protect European Union interests2.

2.7.2 Communication at key learning moments

  1. The U.K. uses a number of key learning moments to engage and educate consumers. In particular, when an auto insurance policy is purchased or renewed, consumers consent to share information with law enforcement and have the option to verify that the insurance policy is recorded in the U.K. Motor Insurance Database. Moreover, when an automobile collision occurs, the Motor Insurance Bureau (MIB) website describes the procedures to be followed after an accident. When an auto insurance claim is made, consumers consent to share information with law enforcement to file a claim, provided that consumers had already consented to share information at the time of policy purchase.

2.7.3 Educational materials for personal injury claimants

  1. The integrated national strategy led by the NFA is publicly available and involves cross-sector and nation-wide collaboration between government and private sector participants.
  2. The U.K. employs different channels to educate and engage consumers which include national, regional and trade publications, newspapers, radio, social media, television and websites.

2.7.4 Incentives for whistleblowing

  1. The Public Interest Disclosure Act provides a framework of legal protection for individuals who disclose information so as to expose malpractice and matters of similar concern3.
  2. The U.K. encourages whistleblowing by offering a confidential service named Cheatline. However, there is limited financial incentive for whistleblowers, except where the matter relates to cartel activity (e.g., collusive arrangements between businesses such as price fixing, limiting supply of production), where leniency policy and financial rewards may be available.

2.7.5 Consumer engagement in the insurance purchase process

  1. The MIB provides consumers with information on resources to obtain an auto insurance quote. Furthermore, the Association of British Insurers (ABI) has published guidance for drivers on purchasing general insurance.

2.7.6 Other successful consumer engagement and education initiatives

  1. The participants involved in an integrated national anti-fraud cross-sector strategy led by the NFA include the Ministry of Justice, Solicitors Regulation Authority, the IFB, the Financial Ombudsman Service, the FSA, the Financial Services Compensation Scheme, the Direct Marketing Association, law enforcement and the Association of British Insurers.

1 European Commission - European Anti-Fraud Office website - < http://ec.europa.eu/anti_fraud/about-us/mission/index_en.htm >

2 European Commission - European Anti-Fraud Office website - < http://ec.europa.eu/anti_fraud/about-us/mission/index_en.htm >

3 G20 Anti-Corruption Action Plan: Action Point 7: Protection of Whistleblowers; < http://www.oecd.org/dataoecd/42/43/48972967.pdf >