Fraud Tools for Claims Adjusters Part 2 by Willie Handler (Guest Post)

Fraud Tools for Claims Adjusters - Part 2

by Willie Handler, Willie Handler and Associates

The state of the Ontario auto insurance product prior to September, 2010 was frightening. Accident benefits costs increased by over 100% in just a 4-year period. These cost increases have translated into higher premiums for consumers.

Many of those involved in the Ontario market believe that fraudulent activity have been on the rise during this period. Much of the evidence is anecdotal but the rapid increase in claim costs could not be ignored.  The situation was particularly acute in the Greater Toronto Area.

Following the 2010 auto insurance reforms, the Ontario government continued to work on anti-fraud initiatives. One of the more significant initiatives was the establishment of the Automobile Insurance Anti-Fraud Task Force in July 2011. The Task Force’s final report and recommendations were submitted to the government in November 2012 and implementation on those recommendations has begun.

What is Fraud?


The Task Force identified three types of fraud currently operating in Ontario’s auto insurance system: organized, pre-meditated, and opportunistic fraud.  

Organized fraud is defined as an organized scheme designed to generate cash flow through either staged accidents or fabricated accidents. Individual claimants are not the organizers of these schemes that often involve white collar professionals. Organized schemes use different methods to defraud insurers including staging collisions with innocent drivers and stealing the identity of health care professionals or accident victims.

Pre-meditated fraud involves an individual who consistently charges insurers for goods and services not provided or provides and charges for goods and services that are not necessary. Those involved in this type of fraud often do not believe their behavior is fraudulent and characterize the label as a reaction to disputes with insurers over entitlement to benefits. Pre-meditated fraud is committed independently and not part of a larger organization.

Opportunistic fraud occurs when individual claimants inflate the value of their claim.  Unlike organized or pre-meditated fraud, the individual committing the fraud does not engage in fraudulent behavior on a consistent basis.

SABS Change Since the 2010 Reforms


Following the 2010 reforms, additional regulatory tools were incorporated into the Statutory Accident Benefits Schedule (SABS) to assist adjusters in controlling fraud.

Verifying Invoices

Insurers need to ask for information to verify that a covered expense was actually incurred before paying an invoice. It is reasonable for an insurer to inform a claimant or their practitioner that an invoice will not be paid until it can be verified that the expense was incurred.

The SABS was amended effective July 1, 2011 to include a provision (section 46.2 of the SABS) that provides insurers with the right to inspect and copy original claims forms and other documents giving rise to a claim. An insurer can also request a statutory declaration, which is a statement made under oath, regarding the circumstances that gave rise to an invoice. The SABS was further amended so that effective June 1, 2013, insurers have authority to require the claimant to also confirm the receipt of goods and services that have been billed.

Benefit Statements

Effective June 1, 2013 FSCO will be authorized to the amount of information that insurers must provide in bi-monthly benefit statements to claimants. The intent of the revised provision is to provide claimants with enough information to help them identify suspicious billings.

Superintendent Guidelines


Subsequent to the September 2010 reforms, the FSCO’s Superintendent has issued a number of new or revised guidelines to address certain billing practices of health care providers.

HCAI Guideline

As part of Ontario’s crackdown on auto insurance fraud, the Health Claims for Auto Insurance (HCAI) Guideline (No. 07/11) has been revised effective December 1, 2011 to provide direction on a number of billing practices.

The submission of incomplete invoices by health care providers in regards to extended health care benefits (EHCB) can create "double dipping" situations where the provider receives payment from both the EHCB carrier and the auto insurer. To address this issue, the revised Guideline stipulates what information is mandatory on the Automobile Insurance Standard Invoice (OCF-21).

The submission of duplicate invoices and invoices for unapproved goods and services is a tactic that is sometimes used to obtain unearned payments from insurers. To address this issue, the revised Guideline prohibits these practices. 

Repeated and/or deliberate submissions of duplicate invoices and invoices for unapproved goods and services may be considered a contravention of terms and conditions by HCAI. This results in suspension or revocation of the health care provider's access to HCAI.

Effective July 1, 2012, FSCO issued an amended OCF-21 form in which the “Plan Number” of the OCF-18 or OCF-23 (to which the OCF-21 refers) is now a mandatory field.  This is the unique number generated by the HCAI system when the OCF-18 or OCF-23 is submitted, and will enable insurers to properly reconcile invoices.

Cost of Goods Guideline

The Cost of Goods Guideline (No. 01/12) has been developed as a result of a recommendation by the Auto Insurance Anti-Fraud Task Force in its interim report and became effective on January 4, 2012.  A SABS amendment was subsequently made to support the Guideline.   

Under the Guideline, the retail price is the lowest price, including delivery charges (if delivery is required), duties and taxes, that would be payable by or on behalf of a claimant to acquire an item of goods from a source that is available to a member of the general public in Ontario.


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