Insurance fraud in the age of COVID-19

insurance fraud

In this challenging period during the COVID-19, a number of areas in business and society have been altered fundamentally. One area, according to a recently convened panel of experts, is how the pandemic has affected insurance fraud. 

Jeroen Morrenhof, the CEO and co-founder of insurance fraud detection software company FRISS, said that when the economy is in decline, insurance fraud incidents tend to increase. ““In the first few months after COVID-19 hit, we saw a decrease of about 45% in claims across our customer base,” Morrenhof said during the Canadian Fraud Prevention Month 2021 webinar.

“But at the same time-there’s obviously a little bit of a delay-we’ve seen a doubling in claims that are under investigation. Insurance fraud is definitely on the rise because of the pandemic and we do expect that to remain for the next couple of months [and] years ahead.”

FRISS noted that over the past several years, new scams and schemes have emerged taking on new forms. “They’re more exaggerated because of COVID and they’re presenting challenges for investigators,” said Jeff Cirino, FRISS’ customer service manager for North America.

Some of the new schemes include the following:

  • A number of body shops charging extra cleaning fees or storage days for cleaning due to COVID-19, described as ‘preying on the fears of the consumer over the virus.
  • There have been instances of staged collision actors capitalizing on the lack of police reports and using the pandemic as an excuse not to remain at the scene of an accident or go to the hospital.
  • Ride-sharing operators are dumping or even burning their vehicles, with the motivation driven by a decrease in demand for their services.
  • A rise in residential arson or water damage, primarily to claim on the insurance money. 

“Financial stress is creating more opportunities. You may see some detached garages or sheds being burned or damaged to generate an influx of cash,” Cirino added.

Morrenhof said that fraudsters and organized crime rings conduct thorough market research to identify the weakest links in law enforcement agencies’ operations and know how to take advantage of those gaps. The towing guidelines recently introduced by the Ontario government that provided responsibilities for tow operators closed some of those links, he added. 

Insurance fraud has been a persistent problem for years in the insurance industry, leading to a trend of higher auto insurance premiums. COVID-19 has undoubtedly affected the fundamentals of human interaction so it is more important now than ever to be more vigilant should you encounter a situation on the road or elsewhere that raises suspicion.