Canadian Institute of Actuaries 2009 Annual Meeting Garry Robertson National Director, Investigations Justin Murray Regional Director Atlantic Canada

Agenda What is IBC? Organized Auto Theft Staged Collisions and Injury Rings Current trends and issues Questions

Insurance Bureau of Canada IBC represents nearly 95% of p & c home, car and business insurers: Data Collection – mandatory submission of auto claims data from insurers as required by Statistical Plan; voluntary submission of claim data over and above tombstone information Marketing – Eg. Operation Red Nose; head rest, Be Smart, Be Safe, D.U.M.B Car, Lock it or lose it

Insurance Bureau of Canada Advocates for Legislative Changes – Bill C-26 Motor Vehicle Theft – mandatory minimum jail time-VIN tampering- trafficking - exporting, led the charge for graduated licensing. Investigative Services – Organized auto theft and Injury Rings

IBC investigative services Over 85 years claims investigative experience Focus on organized insurance crime Experts in vehicle identification, recovery and repatriation

An investigative body IBC is a designated investigative body under federal privacy legislation Personal Information Protection and Electronic Documents Act (PIPEDA) As long a reasonable grounds exist, allows IBC to collect, use and disclose personal information, without consent, to detect and prevent fraud or breach of a Canadian law. [Schedule 1 Clause 4.3 Principle 3]

An Investigative Body 7 (3) (d) (i) “…an organization may disclose personal information without the knowledge or consent of the individual only if the disclosure is…made on the initiative of the organization to an investigative body..and the organization …has reasonable grounds to believe that the information relates to a breach of an agreement or a contravention of [law]”

An Investigative Body 7 (5) “…an organization may disclose personal information for purposes other than those for which it was collected in any of the circumstances set out in paragraphs (3)(a) to (h.2)” [including (3)(d)(i)]

Why people commit insurance crime Low risk High reward High costs to society = The insurance crime equation: The problem

Impact of insurance crime: 2007 Auto theft costs Canadians over $1 billion per year (including police, court costs, medical services, etc.) Auto theft costs Canadian insurers $542 million per year, or about $35 per auto insurance policy IBC estimates that insurance crime is a $3 billion per year industry According to a study by the National Committee to Reduce Auto Theft ( ), because of auto theft: 80 people died 130 people seriously injured

Organized Auto Theft

Fate of a Stolen Vehicle 1. Used to commit a crime 2. Dismantled – chop shops 3. New identity – cloning/revinning 4. Exported

Laval Auto Seizure / Coup de filet à Laval

Safety and Security Auto theft supports organized crime and terrorism Vehicle with Texas plates found in bomb factory by American troops Boston Globe reported that the FBI has found dozens of vehicles used for bombings in Iraq Hundreds of high-end stolen vehicles shipped to Lebanon

Auto Theft for Export IBC estimates that 20,000-30,000 high-end stolen vehicles exported from Canadian ports each year Average value per vehicle $40,000-$50,000. Federal government taking positive steps to address this safety and security issue

Repatriation Main goal is to intercept stolen vehicles before they leave Canada. Establish relations with foreign customs, law enforcement and justice. Return vehicles from out of country - Canadian cars in China, Japan, Africa, South America, U.S. Middle East, Europe.

Imperial Oil Wharves National Gypsum Wharf Richmond Terminals (Mariner & Scotia) Auto Port Port of Halifax Major Marine Terminals Halterm South End Ceres Corp (Fairview Cove) Ocean Terminals DND Dockyard Grain Elevator

Ports Project 2008 Project to determine volume of stolen vehicles exported through ports of Halifax and Montreal Partnered during pilot with Canada Border Services Agency, RCMP and Montreal Police

Ports Project - Results 347 stolen vehicles recovered including repatriations, worth $10 million 112 more vehicles identified for possible repatriation RCMP supporting permanent installation of the ports project at all major ports

AutoFind Over 7000 vehicles recovered. Actual cash value over $30 million. 70% of vehicles recovered within 15 days License plate reader technology. Used to locate stolen vehicles. Operating in Toronto, Hamilton and Edmonton Police operate the system and recover the vehicles. Street Sweeper

Questions

Staged Collisions

Staged auto collisions Deliberate collisions that involve willing and possibly unwilling participants Trends well known in Canada & US. Costs to properly investigate can be expensive and prohibitive

Types of staged collisions Phantom Vehicle (Hit and Run) Swoop and Squat Drive Down Side Swipe Paper Accident

Profit to players Passengers: Pay: $500-$1,000 per person (X4) Receive: Weekly IRBs - $400 X 104 weeks Total exposure: $41,600 x 4 = $166,400 IRBs – Income replacement benefits

Profit to players Paralegal: Receives: $1,000-$1, (X4) Potential profit: - $6,000, plus 20%-30% of each client’s final settlement, and IRBs. Law Society of Upper Canada establishing licence requirements

Profit to players Clinics: Treatment $10,000 x 4 = $40,000 Assessments: In-Home $1,200 x 4 = $4,800 Work Site $1,200 x 4 = $4,800 FAE$1,200 x 4 = $4,800 Dental$1,500 x 4= $6,000 Psychological:$2,250 x 4= $9,000 Driver Evaluation $1,300 x 4 = $5,200 Total exposure $74,600

Impact of insurance crime Since the beginning of the Injury Rings Unit, we have investigated 125 projects Majority involve staged collisions Recent project is estimated to have cost insurers $5.0 million Funds generated support guns, drugs and terrorist activities

Project 92 How it was Discovered Adjusting a Claim Identified oddities in one collision Recognized identical characteristics in a second collision –Same tow truck, similar accident location, same vehicle brand Discovered a third collision with the same characteristics Referred to Special Investigation Unit Additional 9 claims identified that fit the same fraud indicators Brought to IBC and developed through the liaison program to involve multiple insurers

Project 92 The Scheme Vehicles that were involved in previous collisions were purchased from a Salvage Dealer Vehicles re-registered using false documentation Insurers believe they insure a re-built vehicle Vehicles involved in subsequent collision where property damage and injury claims are made

Project 92 Who is involved? A car dealer with a license to purchase the salvage and record the sale of the vehicle when it was purported to be “Rebuilt” A mechanic qualified to write a Structural Integrity Certificate and Safety Standards Certificate Tow Truck Operators to tow the wrecks to the CRC and then to the body shop Body shop mechanics who submitted phony invoices for repairs

Project 92 Who is involved (con’t)? Drivers and passengers willing to report an accident and make a claim Clinics prepared to submit invoices for treatment which was never given Someone to organize all the people and make the events happen

Project 92 Additional 12 collisions identified. Charges are before the courts, in various stages of prosecution 8 guilty pleas to date Sentences typically include house arrest from 6 months to 2 years followed by probation, license suspension for minimum of 1 year and restitution Insurance payments totaling close to $3.0 M

Increased Awareness Police 2007 Accident #28 Initially some resistance from the police in accepting that the collision was an orchestrated, organized event involving multiple players First confession obtained supported the documentary evidence and cemented the concept of a staged collision 2009 Officers identifying red flags at the scene of staged collisions Notifying Insurance Bureau of Canada

Increased Awareness Crown Prosecutors 2009 Project 92 currently has about 200 charges being navigated through the Scarborough Court System Charges are all related and as a result, two dedicated prosecutors have been assigned Crown recognizes the serious threat to safety and the impact on many public institutions

Increased Awareness Accident #34 is a good example of a staged collision that demonstrates the involvement of organized crime and the threat to public safety.

Recent Trends

Staged Auto Collisions Intentional collisions to obtain benefits through the Statutory Accident Benefits Schedule, or through Bodily Injury Tort Rings involving PD only – increase business to shops Obtaining coverage for uncovered losses/owner Referrals and Kickbacks –Tow truck operator involvement –Professionals

Rehabilitation Centre Crime Billing for services not provided Treating for more than injury warrants Assistive devices Double invoicing Assessments –Double assessments –Break out of assessment components –Multiple assessments Identity Theft

Employment Fraud Falsifying employment documentation to obtain Income Replacement Benefits Claims Forms Cancelled cheques T4 slips record of employment Double dipping

What Can Insurer Do? Obtain Statements – be detailed, ask questions Compare claimants signatures Contact the doctor or other practitioner Send your client copies of the claim forms Send audit letters summarizing payouts Communicate with other insurers if dealing with multiple occupants

Report insurance crime. Take the time. IBC receives tip via or telephone IBC searches for organized activity IBC TIPS

IBC contacts Garry Robertson National Director, Investigations Justin Murray Regional Director – Atlantic Canada