Black box puts brakes on bad claims

Automotive telematics devices are used to record driving data that can reduce a driver’s insurance premiums. But they can also help fight accident fraud.

In early 2014, a Vauxhall Astra bumped into the tow bar at the rear of a flatbed truck on a roadway in northwestern England. The truck had halted suddenly and the Astra was unable to stop in time to avoid rear-ending it. The truck was undamaged and the small family car suffered only minor damage to its front. The three occupants of the truck, however, claimed £54,000 ($99,000) from Aviva, the car’s insurer, mostly for personal injuries, especially whiplash, which they said they suffered because of the collision.

Whiplash is a difficult injury to disprove. It is also the most common injury reported by victims of car accidents in the UK. "Britain is now considered to be the ‘whiplash capital of Europe,’ " says Watershed Claims Services Ltd., a firm of specialist adjusters. It noted that the Commons Transport Select Committee on fraudulent personal injury claims "advised that the number of personal injury claims is rising, despite a notable fall in the number of collisions. A large proportion of these claims relate to whiplash injuries, which are difficult to assess."

According to the British Insurers Association, 75% of motor accident personal injury claims in the UK are for whiplash, compared with an average of 40% throughout the rest of Europe.

The passengers in the flatbed truck likely counted on their alleged whiplash injuries as a means of collecting the money they said they were due. What they didn’t count on was a small "black box" that had been installed in the Astra.

The box was a telematics device that records driving data, such as the driver’s speed and braking information. Its primary purpose is to provide data that can reduce a driver’s insurance premiums. But it can also help fight accident fraud.

The UK’s Asset Protection Unit (APU), which insurers use to investigate suspect claims, analyzed the black box to assess the low-speed collision. It revealed that "due to the difference in size and weight of the vehicles, the claimed injuries could not have occurred," PostOnline reported. The purported injuries were implausible, the APU testified in a court hearing, and the claims were dismissed. No charges were laid against the claimants. As a result of the dismissed case, the driver of the Astra was likely saved from an increase in his insurance premiums.

"The APU says it’s about time insurance firms had a tool that could prevent fraudulent claims and keep premiums down," The Telegraph reported.

"Fraudulent personal injury claims add millions to the cost of the nation’s insurance premiums," noted APU representative Neil Thomas. "Many fraudsters prey upon vulnerable motorists in premeditated attempts to fleece them and their insurance firm out of thousands of pounds, but others are simply opportunistic."

Like other insurers, The Telegraph reports, Aviva has been encouraging customers to install telematics hardware "as it can help avoid instances of insurance fraud ... and other companies like it have begun offering reductions in premiums simply for adding the systems to your vehicle, though extra bonuses for safe driving are also being implemented by some insurers."

Automotive telematics is a technology "that uses hardware and software applications with remote communication devices, such as cellphones, GPS, wireless devices and such, to obtain information about vehicles," writes Rupert Fallows, a UK service business development expert. Telematics provides "key data on vehicle operations, driving behaviour, collision warnings, vehicle position and navigation, mileage, etc."

The data is often collected and stored at a company such as Imetrik Global Inc., a Montreal-based firm that provides telematics services to some Canadian insurers.

Obviously, there are numerous applications of this technology for the car insurance industry beyond helping detect fraud but, in the latter regard, it offers investigators a wealth of information that was often unobtainable in the past.

Several Canadian insurance spokespersons contacted said they weren’t aware of telematics playing a role in fraudulent insurance claims in Canada at the moment, but all predicted it was only a matter of time.

Telematics devices are used in some provinces, especially Ontario and Quebec, with western and eastern provinces considering them to record a driver’s activities.

False insurance claims are as serious a problem in Canada as in Europe, with whiplash also the No. 1 injury reported by alleged Canadian victims. The Insurance Bureau of Canada (IBC) underlined that statement when it reported in March that car insurance fraud in Ontario alone "adds an estimated $1.6 billion a year to insurance premiums and healthcare, emergency services and court costs."

A February 2012 article in The Toronto Star called the Greater Toronto Area "Canada’s phony collision capital." This was in reference to the arrest of 37 people, mostly from a South Asian community, on charges of having staged car accidents. The Star reported that 130 charges were laid stemming from 77 collisions that "police say were staged and have helped send insurance premiums skyrocketing in the province," adding that false claims account for "between 10% and 15% of all premiums, according to a recent report by the Auditor General of Ontario."

"There’s no question that the GTA is the staged collision capital of Canada," says Rick Dubin, vice-president of investigative services for the IBC, which was a key player in Project Whiplash, as the police investigation was dubbed. "The phony accidents can be lucrative, said [Toronto Police Services] Sgt. Mike McCulloch — as much as $50,000 per scam."

State Farm, one of the first companies to suspect fraud by the accused, said its losses from the scam amounted to $4 million.

Although staged accidents, known as hard fraud, garner the headlines when arrests are made, the insurance industry reports that soft fraud, such as providing false information about coverage or actual losses, is a more serious problem. "Soft fraud is far more common," says Allstate Insurance Co., noting that "insurers estimate that some degree of fraud is involved in 15% of all claims."

Telematics could help reduce one common type of soft fraud, which is the practice by some policyholders of not telling the truth about how far they drive to work each day. By underreporting the distance, they pay lower premiums. Knowing that a telematics device records their precise driving record could make drivers think carefully before claiming they live closer to the office than they actually do.

While telematics is accepted as being able to help reveal the truth in car accidents, it recently had a far more serious application: exonerating a suspected murderer.

Progressive Corp., one of the largest providers of car insurance in the US, offers drivers a telematics device known as Snapshot. In June 2013, it helped clear a 28-year-old Cleveland man of charges of suffocating his seven-month-old daughter, the Plain Dealer reported. Prosecutors claimed that Michael Beard had killed the infant at her mother’s house at 4:45 a.m. But the defence attorney presented evidence from the Progressive Snapshot device in his car that showed he had turned off the car at 4:44 a.m. and turned it back on three minutes later, the paper said. In those three minutes, he discovered that the baby wasn’t breathing, awakened her mother and returned to the car to rush his daughter to the hospital.

That data convinced the jury that Beard did not have the time to murder the child.

It is clear that telematics can play an important role in fraud and other criminal cases. It is also certain that telematics is here to stay. "Under new EU regulations all cars will soon have to be fitted with telematics devices [also known as a black box]," reports international accident management service Hamilton Levi. "The Digital Agenda For Europe’s objective is to have a system called e-Call fitted to all new cars from October 2015. This system automatically detects a car accident and calls the nearest emergency centre, providing the incident’s location details. Recent research indicates that by 2020 half of all cars will be fitted with telematics devices."

New York-based ABI Research "found the number of global telematics [including global positioning systems] users will grow from 37 million in 2010 to 211 million in 2015," iWeek reports. "The US, Asia Pacific, Western Europe and, to a lesser degree, Latin America, are the biggest users of consumer telematics. The Middle East and Africa and Canada lag behind."

Although Canada has been slow to adopt telematics, that will soon change. "We may be late adopters, but Mark Breading, a partner at Strategy Meets Action, says Canada will catch up quickly," Canadian Insurance Top Broker reported in May. "Industry experts predict that more insurance companies will get approval to launch [usage-based insurance] programs in Ontario — where currently Desjardins is the only player — and other provinces this year. ‘I’m expecting as many as half a dozen Canadian insurers to enter the market, or announce that they’re entering the market, in 2014,’ says Breading."

For investigators of car accidents, or of any matter where the activity of a car’s driver is involved, telematics is a wonderful tool. It seems certain to put the brakes on a considerable number of false claims.