Why economic worries have some motorists inflating claims

Motorists involved in accidents may sometimes be inflating claims reports to include pre-existing vehicle problems.

Auto claims that are submitted can be flagged and reviewed on a without prejudice basis if it appears an additional problem has been added alongside other, obvious damage. And insurers have advised those in the industry to watch for inflated claims, which makes sense given the state of the economy, says Jesica Ryzynski, a claims specialist at Mitch Insurance.

“[In] the ones that I have seen…it’s almost always a transmission issue, and so the vehicle is either done or needs massive repairs. They generally have a lien, so this is a situation where there’s a loan as well as a substantial repair needed,” she tells CU.

“People don’t think things through necessarily…because [precarious economic circumstances have them] in a state of high stress and anxiety, and they’re thinking this might be the solution. I don’t know that people fully understand how these are investigated and how thoroughly they will be looked at.”

None of the claims Ryzynski’s seen so far involve other vehicles. Instead, the automobiles are hitting stationary objects, usually a curb or a large pothole.

Insurer review process

Although claims are taken at face value, Ryzynski notes any discrepancies or lack of evidence will lead insurance companies to dig further.

Why innovative customer experience will define the future of personal auto insurance Image

Insights Paid Content

Why innovative customer experience will define the future of personal auto insurance

Technology is helping insurers reimagine how they support personal auto customers — and it starts the moment a collision is reported, say experts at Accident Support Services International.

By 

Sponsor Image

And she’s gotten the sense some customers reporting single-vehicle accidents don’t understand that incidents like hitting a pothole or other stationary object do get reported as collisions and remain on the driver’s record.

“These incidents become investigated, and I am asked to provide information. The client reaches out, asking why and what’s happening. As brokers, we would leave that decision up to the [insurance] company, because when somebody first reports a loss, we accept that they are telling the truth,” she says.

“And…there could be a circumstance where someone has hit a curb or a pothole so hard that [they] did do damage to their transmission. Once it goes to the adjuster [there are] red flags…like no other damage to the vehicle, no indication of an impact large enough that would do that extent of damage. And [adjusters] do always ask if there was a police report. There rarely is. They don’t make a police report because there’s no one else involved.”

If a client reaches out asking why they’re being questioned, she’ll delicately explain that the insurance company has questions about how the mechanical damage could have happened when the vehicle hit a curb or other object. And she stresses the insurer, not the broker, is the one looking into the matter and making any decision.

“Usually…the mechanics make [the] call. They do the estimates, the appraisal, they’re the ones who determine there is no way that this transmission was damaged by this impact, [or that] there’s evidence that this transmission has been leaking fluid for, probably, months,” says Ryzynski. “They find the pre-existing issues. They can see that something has been wearing out…there’s an indication…this transmission was in trouble long before this impact happened.”

“They would get all the diagnostics. They would have all of their evidence to the contrary. They would present that to the client and say, ‘Here is why there is no way that this extent of damage was done by this incident.’”

Related: Why insurance fraud is on the rise

And a client would be allowed to dispute the decision, obtain their own appraisal and present evidence that contradicts the insurer’s findings. From there it would go into arbitration with both appraisals being examined. So far, she says, no client has taken that step.

“If someone hits a curb and there’s no damage to the vehicle, but suddenly the transmission is blown, we can explain [to the client] that having a detailed diagnostic report completed is part of the process and something the insurance company will request be done,” Ryzynski says.

“That explanation may give the claimant some pause or at least something to consider before they hear from the adjuster. It may give them an opportunity to change their mind.” 

While brokers never want to give clients the impression they don’t believe them, she says they can ask a few questions, “that might have the client think to themselves, ‘Oh, maybe this is not going to be as quick and easy as I hoped it was.’”

Phil Porado

Phil, an award-winning journalist with over 30 years of experience in financial topics, has been managing editor of Canadian Underwriter for more than three years.