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My nephew had his car broken into and he lied and claimed he'd had a brand-new MacBook in it. He doesn't think it's wrong since insurance companies charge so much and make a lot of money. This is fraud, right? I'm trying to scare him. Dan, Toronto

Insurance fraud is, well, fraud – but for some, it's considered a matter of just getting back a small chunk of what you've been pouring in for years, a researcher said.

"People think of insurance policies as a savings account – the more they've paid in, the more entitled they feel to take something back," said Dr. Yoel Inbar, assistant professor of psychology at the University of Toronto. "If you've never filed a claim, it almost feels like you're getting a bad deal."

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In several studies involving about 1,000 people in the United States and the Netherlands ("there's no reason to believe this isn't true for Canada"), Inbar found that people rationalized acts of fraud such as getting the body shop to fix existing damage along with claim-covered accident damage.

They didn't see it as stealing, he said.

"People don't understand how insurance works – they think it's a big faceless corporation and it will come out of their profits," Inbar said. "So they don't realize that what it actually does is make it more expensive for everybody."

The Financial Services Commission of Ontario (FSCO) referred to Inbar's research when it released an Ipsos survey of 1,052 Ontarians.

In that survey, about 10 per cent said they had submitted an exaggerated or false claim.

Plus, 35 per cent said they didn't know that defrauding an insurance company is an offence under the Criminal Code of Canada – and 25 per cent said they didn't know auto insurance fraud affects auto insurance premiums.

"People don't understand the basic idea of risk pooling," Inbar said. "If we ask people to describe what auto insurance is, they say, 'You pay into to it so eventually you can take something out.' "

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Inbar said "a small minority said what an economist will tell you: that it's a mechanism for risk hedging."

In 2010, KPMG estimated that insurance fraud cost companies $768-million to $1.56-billion.

That same year, Ontario reduced benefits paid out to people injured in accidents – and it saved insurance companies $2-billion.

In 2015, the Ontario Trial Lawyers Association released a report by two York University professors showing that Ontario insurance companies made big profits – as much as an 18.5 per cent return on equity.

What if you get caught committing insurance fraud? The claim could get denied, your insurance policy could be cancelled and, if it's more than $5,000 and you're convicted, you could get up to 14 years in prison.

Less than $5,000? Up to two years.

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Inbar thinks fraud might decrease if people understand that fraud ends up costing them – and everybody else – more for insurance, "I think raising public awareness can be really helpful – people are more likely to do these things because they don't fully understand the consequences," Inbar said. "The bulk of these fraud claims are smaller-scale stuff – making people aware of the costs could be helpful."

Have a driving question? Send it to globedrive@globeandmail.com. Canada's a big place, so please let us know where you are so we can find the answer for your city and province.

We travel to the Insurance Institute for Highway Safety in Virginia to see a Subaru slam into a barrier and learn what makes it safe for the driver
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