Addressing autobody repair fraud in Alberta

March is Fraud Prevention Month in Canada, a month-long campaign aimed at raising awareness about different types of fraud, how to recognize them, and how to protect oneself from becoming a victim. The goal is educating consumers and businesses to actively "recognize, reject, and report" fraudulent activity. The public receives materials routinely from the insurance industry that implies that victims in car crashes are to blame for fraud in the system. However, one type of fraud that much more common and likely contributes significantly to higher insurance premiums paid in Alberta is fraud associated with autobody damage assessments and repair, whether from hail or a collision.

Compared to other provinces in Canada, it seems Alberta insurers so far have not taken this type of fraud seriously. This is surprising because more was paid out in Alberta to repair the vehicles damaged in the single August 2024 Calgary airport hailstorm than to all injured victims in Alberta in any given year since 2018. The insurance lobby estimated that the recent hailstorm has already caused $900 million of property damage to insured automobiles. By contrast, the total amount paid by insurance companies to victims for all fatalities, injuries, lost income, career retraining, costs of care, and other general damages was significantly less in each of the years of 2018 – 2022, and likely in 2023 and 2024 as well. The apparent priority of payment of damages for damaged vehicles over damages for injured Albertans is misplaced and discourages Albertans from making reasonable claims.

There could be major premium cost savings in reducing automobile repair costs, including by reducing fraud within the automobile repair industry. In 2018, Aviva estimated that auto repair fraud was costing Ontario $547 million annually and was costing all Canadians more than $2 billion each year.

Aviva Investigation in Ontario

In the investigation conducted by Aviva, ten cars were purchased and equipped with hidden cameras. The vehicles were then deliberately crashed or damaged, and placed at random locations on a highway with actor owners. The investigation found that there was clear evidence of fraud involving repairs to nine out of ten cars and that autobody shops wrongfully billed and racked up costs through a variety of fraudulent means. Aviva concluded that some vehicle appraisers may work in collusion with automotive repair facilities who pay them to exaggerate vehicle damage repair estimates. Aviva has also identified that autobody shops have exaggerated the time spent, quality of parts used, damage to vehicles or even created it themselves in more extreme cases. These issues go beyond the challenge of estimating the cost of repair.

Aviva’s then Vice President of Fraud Management, Gordon Rasbach, stated that the investigation showed just how pervasive the problem of autobody repair fraud is in Canada and that all honest Canadians are “paying for it through higher premiums…” While somewhat eclipsed during COVID-19, an Ontario Superior Court decision was decided in June 2019 validating the trap Aviva set for autobody mechanics in having hidden cameras.

With Alberta’s premiums higher than usual despite the number of injured persons remaining relatively steady, fingers should more properly point to fraudulent and questionable autobody repair tactics and billing practices.

ICBC Investigations in British Columbia

While not all investigations lead to published legal decisions, the special investigation unit of another insurance company, ICBC, commenced an investigation into the billing practices of an autobody defendant, which revealed evidence of fraud in 65 cases. This represented over 40% of files that it reviewed. Of the 42 vehicles, investigators inspected and identified fraud issues with 25 of them. ICBC brought a  court action against the autobody shop alleging that it had billed ICBC for parts that were returned for credit, repaired parts instead of replacing them as authorized, billed ICBC for labor which was not done, and supplied parts from stock that they fraudulently represented came from third party suppliers.

Summary and Strategic Priorities for Alberta

It is unlikely this wrongful behaviour is unique to only British Columbia and Ontario, but there is currently no evidence of any investigation action taken by Alberta insurers, and a search of the reported case law showed that there were no reported cases of Alberta insurers bringing action against auto repair fraud.

This area of insurance is costing Albertans far more than innocent parties’ claims for damages for injuries. Why is this not addressed? Who has held the insurers and autobody shops accountable? Why, Albertans should ask, would the industry and government not tackle this problem before undermining the rights of innocent injured Albertan who have suffered valid loss because of another’s negligent or reckless driving?

In contrast, surviving and injured Albertans can expect to have to undergo rigorous investigation with an independent party with adverse assumptions, extensively analyzing 5-7 years of their entire medical history, being assessed by insurance medical assessors who seem to rarely agree with family doctors, and eventually having to go through a day-long questioning hearing or a multi-week trial. Given the high rates of autobody repair fraud reported across the country, concerns about affordability may be more meaningfully addressed by reforms to address auto repair costs and associated fraud. This could involve increasing penalties for those who defraud insurers, ensuring that insurance companies are required to report fraud and share fraud investigation data, and by funding anti-fraud investigative measures such as second opinions and more rigorous oversight. Preventing autobody repair fraud should be a priority.

The Royal Canadian Mounted Police investigates fraud including autobody repair, and you can report fraud to the RCMP by calling the Canadian Anti-Fraud Centre at 1-888-495-8501. You can also report fraud by emailing info@antifraudcentre.ca.