Insurance Bureau advertising campaign



 An advertising campaign by the Insurance Bureau of Canada is in full swing. Those full page ads in the first section of the Toronto Star’s Saturday edition don’t come cheap. But these ads aren’t trying to sell a product. They aren’t trying to convince car owners to increase their coverage. That would be a good thing. Rather, the ads are part of what’s called social marketing or advocacy advertising. The ads are an attempt to convince the public and legislators that the main thing standing between consumers and lower car insurance premiums is fraud.

Jay M. Feinman, Distinguished Professor of Law at Rutgers University School of Law, Camden, New Jersey, and author of the book Delay Deny Defend: Why Insurance Companies Don’t Pay Claims And What You Can Do About It, has studied similar campaigns in the United States. He says the first step of such a campaign is to convince the public of the enormity of the problem of insurance fraud. The latest ad in the Toronto Star cites a figure “as high as $1.6 billion a year” as estimated by the firm of KPMG. Citing the KPMG study certainly adds credibility to the IBC claims, but remember that it was the IBC that retained KPMG and KPMG’s actual estimate was a range of $770 million to $1.6 billion in 2010.

But if you read the KPMG report you’ll see it isn’t that simple. KPMG points out that it wasn’t retained “to perform its own analysis of insurance claims to identify those that provide indications of fraud.” KPMG relied on information largely provided or originated by insurance companies. They didn’t conduct any audits nor did they attempt to verify the accuracy of the information they were given. So it’s not surprising they view their numbers as “broad estimates”.

I’m not suggesting that insurance fraud isn’t a problem nor am I attempting to belittle the extent of such fraud. It is a big problem, as is any criminal activity. But as Feinman states, “the social marketing of insurance fraud likely has exaggerated the problem and therefore has been used to justify an excessive response.” He cites one study where the ratio of suspected fraud to provable fraud was about 25 to 1.

That doesn’t mean we shouldn’t attempt to prevent, investigate and prosecute insurance fraud. But it means we are taking the wrong approach if we focus too heavily on insurance fraud.

By focusing on insurance fraud we justify undue reductions in accident benefits. We turn the claims process upside down by focusing on fraud instead of providing fair access to accident benefits. Injured victims and their insurers become adversaries resulting in massive sums wasted on lawyers, medical reports and so-called independent medical examinations. As Feinman points out victims are treated as suspects.

The insurance industry has trotted out an annual figure of about $1.3 billion of fraud since the early 1990’s. Until the KPMG report the figure never went up or down. Now the industry cites a figure of as high as $1.6 billion.

We are told reductions in premiums will follow once fraud is brought under control. But here’s the problem: Insurance fraud as defined by the industry will never be lowered to a satisfactory level. They haven’t been able to budge their estimate of fraud downward in over 20 years.

Yet, insurance premiums have gone up and down during that period. What does that tell us about the effect of fraud on premiums?

The next battle in car insurance is being fought in defining what qualifies as a catastrophic injury. The insurance industry is pushing for what it calls a new definition based on “medical science” not “lawyers’ arguments”. But using the fraud card to justify a dilution in the definition of catastrophic injury will only serve to devastate the lives of the approximately 1% of car accident victims who would qualify under the current definition. Their medical and rehabilitation benefits will shrink from $1,000,000 to $50,000.

Isn’t it time to stop focusing on fraud and start focusing on the real issues facing car accident victims?

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