What is insurance fraud?

Insurance fraud happens when someone deliberately lies to an insurance company to get money they don’t deserve. This could mean making up claims, staging car accidents, inflating repair bills, or even using fake policies. And unfortunately, it’s becoming a bigger problem here in Canada.

According to the Canadian Underwriter, in 2024, one insurance company reported a massive 76% jump in fraud investigations and a 46% increase in confirmed fraud cases. Even more concerning, about 67% of those cases involved auto insurance. According to the Insurance Bureau of Canada (IBC), insurance fraud adds over $1 billion every year to premiums, costs that eventually fall on all of us.

These extra costs don’t just hurt insurance companies; they hit everyone’s wallets. When insurers lose money to fraudulent claims, they raise premiums, tighten policy rules, or limit coverage options to make up for it. In the end, honest Canadians pay higher rates and might get fewer benefits.

Fighting insurance fraud isn’t just about catching fraudsters. It’s about protecting fair rates, keeping coverage accessible, and making sure the system works when people truly need it. Here’s what you should know about insurance fraud in Canada.

Types of insurance fraud in Canada

According to Intact’s Senior Vice President of Claims Canada, insurance fraud is constantly changing and can show up in many different ways. Some scammers are even using advanced tech, like AI, to pull off new types of insurance fraud.

But many people don’t realize just how wide-reaching insurance fraud really is. While most people picture big, elaborate scams or organized crime rings, it can also be as simple as leaving out a detail on a claim or slightly exaggerating what happened to get a bigger payout. Even if it seems harmless, these small acts are still considered fraud and can lead to serious consequences. While there are many ways insurance fraud can happen, here are a few of the most common examples:

Policy misrepresentation

This type of fraud happens when someone lies to their insurance provider to get a cheaper premium. Here are some examples:

• Using a fake address in a lower-risk area when they live somewhere else

• Misreporting the make, model, or year of their vehicle

• Claiming they park in a secured garage when they really leave it on the street

• Listing themselves as the primary driver when a younger or higher-risk driver is the one using the car most of the time

While these shortcuts might seem harmless or like a clever way to save money, they’re still considered fraud, and they drive up insurance costs for honest drivers across Canada.

Staged collisions

This is where fraudsters actually plan crashes on purpose, luring unsuspecting drivers into minor accidents so they can make false injury or damage claims. According to the non-profit Équité Association, some examples of staged collisions include:

Even tow truck drivers sometimes get in on the scam, towing your car to shady repair shops that rack up inflated repair bills. In fact, as of 2024, Ontario introduced new towing regulations under the Towing and Storage Safety and Enforcement Act (TSSEA). Now, tow operators and drivers must have a provincial certificate to legally work in the industry.

Arson

Some fraudsters go as far as setting their own property on fire to collect an insurance payout. In Canada, intentional arson remains a serious problem, costing insurers and communities millions every year.

The Équité Association's ‘Scams Leave Lasting Scars’ campaign, which highlights the devastating impacts of insurance fraud, spoke about one instance of arson when a family was left homeless after a landlord burned down their rental property to collect the insurance money.

Medical services fraud

While the majority of health professionals are honest, some disreputable clinics exist that overcharge or bill you for treatments you never actually received. In some cases, these clinics might even forge a doctor’s signature on forms to collect health insurance payments for fake services. For example, the Équité's ‘Scams Leave Lasting Scars’ campaign also spoke about another instance where a clinic coerced elderly patients into unnecessary health treatments, resulting in premature death.

To protect yourself, always verify your provider’s credentials and make sure you fully understand anything you’re signing. And never sign blank forms, as dishonest staff could later fill them in with treatments or services you didn’t get, leaving you on the hook for fraudulent healthcare claims.

Vehicle theft

Thieves don’t care if your car is in plain sight, tucked in your driveway at night, or even behind a locked gate. If they want it, they’ll take it. Auto theft is a major problem across Canada, posing risks to public safety and fueling international crime. In fact, car thefts have increased 165% since 2017 in Ontario alone, with losses topping $1 billion in 2023, according to the IBC. High-end SUVs are big targets, often stolen for export or resold with fake VINs.

Identity theft

Even if you wouldn’t commit fraud, someone else might do it in your name. Cyber criminals can steal your personal information to open bank accounts, get credit cards, or file false insurance claims. The Canadian Anti-Fraud Centre states that identity fraud losses are estimated in the tens of millions each year in Canada. That's why it's essential to always be cautious and protect your identity. Never share personal information through social media, suspicious emails, or over the phone.

Ghost brokers

If an insurance offer sounds too good to be true, it probably is. According to Équité, “ghost brokers” pose as licensed brokers or agents and sell fake or invalid policies, leaving you completely unprotected. The Alberta Insurance Council adds that these scammers often run their schemes online, using social media or phone calls, which makes it hard to track down who they really are or where they’re operating from.

That's why you should always verify that an agent or broker is licensed through your provincial insurance regulator, such as the Registered Insurance Brokers of Ontario (RIBO) or the Alberta Insurance Council, or buy your policy directly from a known insurance provider.

How does insurance fraud affect your insurance premiums?

Insurance fraud doesn’t just affect the person committing it. It trickles down to honest drivers like you. Here's how insurance fraud affects your premiums:

Increased premiums for everyone

As we mentioned earlier, in Canada alone, fraud is estimated to add $1 billion to our yearly insurance premiums, a hefty cost shared by all policyholders. In fact, the Coalition Against Insurance Fraud found that 72% of people who reported being victims of fraud said their car insurance premiums went up afterward. This happens because insurers see anyone involved in a claim, even the victim, as a higher risk, which leads to higher premiums to cover potential future payouts.

Tighter policies and fewer benefits

Increases in fraud rates also mean stricter rules for everyone, such as rigid policy terms and tougher claims processes. These measures help insurance companies limit fraud risk, but they also lead to slower payouts and more paperwork for legitimate customers.

Higher premiums for offenders

If you're caught committing fraud, insurance providers may:

• Reject your claim

• Cancel your current policy

• Refuse to renew your policy

• Have you pay significantly higher insurance rates in the future (if you can find a willing provider)

This is because insurers view anyone who has committed fraud as a major risk. You're now seen as more likely to make inflated or false claims again, so they want to protect themselves from future losses.

Legal consequences of insurance fraud in Canada

Under Section 380 of Canada's Criminal Code, defrauding an insurer (whether through deceit or misrepresentation) is a criminal offence. If someone is caught committing or even attempting to commit insurance fraud, the consequences can be severe:

• If the fraud involves less than $5,000, it can lead to up to 2 years in prison

• If the fraud involves more than $5,000, it’s punishable by up to 14 years in prison

• For massive fraud (over $1 million), a minimum of 2 years’ imprisonment is mandatory

Some provinces also have their own legal consequences. For example, in British Columbia, under section 42 of the Insurance (Vehicle) Act, a person convicted of filing a false auto insurance claim can face fines up to $50,000 and up to 2 years in jail.

Plus, if you’re convicted, you’ll end up with a criminal record, and that can follow you for life. It can make it harder to get a job, rent an apartment, keep or get professional licences, and even impact your immigration status.

And if you work in a regulated field like healthcare or education, your employer or insurer might also report you to your licensing body, which could lead to your licence being suspended or taken away completely.

How Canadian insurance companies help fight against fraud

Canadian insurance companies take fraud seriously, not just to protect their bottom line but also to keep premiums fair for honest customers. To catch fraud early, many insurers now use powerful fraud detection software powered by AI. For example, Shift Technology’s platform helps Canadian insurance providers spot suspicious patterns in real time by flagging organized fraud rings, inflated claims, and unusual repair requests.

Also, in 2021, the IBC transferred its Investigative Services division to the Équité Association. Équité now combines IBC’s expertise with pan-Canadian fraud analytics (CANATICS) to enhance data sharing, lead cross-insurer investigations, support law enforcement, and increase public awareness of insurance fraud.

Further, insurance companies regularly share intelligence and coordinate with investigative services teams, police, prosecutors, and regulators. For instance, partnerships between large insurance companies and Équité have helped reduce organized crash-for-cash schemes and auto theft. Intact even reported an 18.6% drop in auto thefts in Canada in 2024.

How to protect yourself from auto insurance fraud

Some drivers will do just about anything to make a quick buck, like causing a crash on purpose. These so-called “crash for cash” scams not only put honest drivers in danger but also end up costing all of us more through higher insurance premiums and taxes. While these schemes can be tough to spot, there are ways you can reduce your risk of becoming a victim of car insurance fraud. What you can do:

Stay in the know

Learn about common staged accident setups, like the four we mentioned earlier. The more you know, the easier it is to recognize suspicious situations on the road.

Use a dashcam

Installing a dashcam can be a huge help. If something happens, you’ll have video evidence to back up your side of the story and help prove if a crash was staged.

Speak up after a collision

Always follow proper steps after an accident and let your insurance broker or agent know right away. Mention anything that feels off, such as:

• If you felt forced into a dangerous manoeuvre

• If you notice odd behaviour from the other driver

• If you suspect any exaggerated injury claims

Your insurance broker can guide you and help flag potential fraud.

Avoid paying cash on the spot

If the other driver asks for cash instead of going through insurance to submit a legitimate claim, that’s a huge red flag. Always report the incident to your insurance company. Not only does it protect you from fraud, but it also keeps the scammer from profiting.

How to report suspected insurance fraud in Canada

Although insurance companies are constantly working on developing new tools to investigate and determine fraud, your efforts can also help make a difference.

If you believe you are a victim of insurance fraud, contact your insurance company or broker right away to report it. If you know someone who is committing insurance fraud, you can report it by calling:

• 1-877-422-TIPS (English)

• 1-866-422-4331 (service en Français)

• 1-800-222-TIPS (Crime Stoppers anonymous)

You can also report it online by filling out the Équité Association's Report Insurance Crime form.

Learn more from BrokerLink

Together with the help of the government, insurance providers, and people like you, we can all work towards eliminating insurance fraud, and you can have peace of mind knowing that your premium contributions are only going towards genuine, lawful claims.

If you have any further questions or concerns about insurance fraud and how it impacts you, contact BrokerLink today. You can reach us by phone, email, or in person at any one of our locations throughout Canada.