Thank you, Mr. Chairman.
The Insurance Bureau of Canada is the national trade association that represents Canada's home, car, and business insurers. As a national trade association, we have an investigative services division that has a staff of 59, of which I am the head. Our team includes a number of seasoned former police veterans who spend their days investigating organized insurance crimes involving staged auto collisions and auto theft. This is a very busy job for our people due to the growth in Canada of organized crime.
Insurance fraud is a big business in Canada. In just home, business, and auto insurance, it is estimated to be a $3-billion-a-year business. On average, 10% to 15% of all claims have an element of fraud. Consider for a moment that our industry paid out $25 billion in claims in 2008 and you'll see the scope of the problem. Let's be clear as to where that money has to come from; it comes from individual Canadians in the form of higher premiums.
Organized crime long ago saw an opportunity in insurance fraud. Why? Because it is a low-risk, high-profit business. The penalties are minor, and jail time is rarely handed out, even for cases involving substantial fraud. In the brief time I have here, I want to tell you about just one type of highly organized insurance fraud: staged auto collisions.
Phoney car crashes are a big business in the Greater Toronto Area, which is considered the staged auto-collision capital of Canada. These complex schemes frequently involve organized criminals linked with tow-truck operators, body shops, paralegals, and registered health care providers. I also refer to them as rehab centres or rehab clinics. In one particular investigation, which is ongoing right now, 41 staged auto collisions are alleged to have taken place involving fraudulent auto physical damage and fraudulent accident benefit claims. Further investigation suggests a possible 116 additional alleged staged collisions involving this criminal organization.
Altogether, we estimate that this one project alone could cost insurers and their customers between $20 million and $25 million in potential fraud. To date, over 200 charges have been laid against 38 individuals.
Staged collisions involve not only those intentionally causing the collision but also the innocent drivers who are placed at great risk of serious injury or death. Particularly dangerous is the “swoop and squat”, in which two cars intentionally box in the innocent driver. A third car quickly passes in front and then jams on the brakes, forcing the innocent driver to rear-end the vehicle ahead. The vehicle struck in the rear is usually carrying several passengers who paid for their seats so that they can claim to be injured. They submit fraudulent accident benefit claims, which are supported by rehab clinics.
In more elaborate schemes, a runner recruits drivers and passengers to play roles in a carefully scripted, choreographed, controlled crash. Bogus witnesses are positioned near the staged collision to support the criminals' account and to contradict the innocent driver's testimony.
IBC's investigative services investigates, on average, over 30 such projects a year. Unfortunately, those convicted and sentenced usually receive conditional sentences, and restitution is rarely ordered. In keeping up with organized crime, however, designated investigative bodies, like ours, and police and prosecutors need more tools. A strengthened Criminal Code to get tough on these types of crimes is a top priority, and we were pleased to see that the House of Commons has already passed Bill C-26 in regard to auto theft.
This legislation, Bill C-52, is another positive step that takes direct aim at the kind of organized criminals our industry battles every day. Tougher penalties for fraudsters will send a clear message that Canadians will no longer tolerate having their savings targeted by criminals.
It is time for the fraudsters' free ride to end, and Bill C-52 makes strong steps in that direction. We urge parliamentarians to pass this legislation.
Thank you. We would be pleased to answer any questions committee members may have.