Insurance Fraud: The Leading Cause of High Insurance Premiums for Canadians

A photo of a car thief in handcuffs being arrested.
An ever-present, growing problem in the Canadian insurance industry is fraud. What some view as a “victimless crime” can affect thousands of insured Canadians.

Insurance fraud can be well planned with a network of perpetrators working in tandem, or committed by a single person in a moment of duplicity. The constant across all fraudulent claims is their result: they drive up premiums for all insurers.

Auto insurance fraud can take many forms and be carried out by any number of people in an auto claim process.

Don Forgeron, President and CEO of IBC, at the Ontario Association of Chiefs of Police Meeting on June 24, 2019, warned of the tie between criminal organizations and insurance fraud:

“Fraud can be a way for organized crime to bring in revenue and support its other operations. It can be a way for dishonest people to take advantage of unsuspecting citizens – sometimes threatening them with violence or retribution. Beyond that, there are also people across our province who are put at risk every time a car accident is staged to potentially secure accident benefits for the so-called victims.”

Drivers who know how to crash vehicles, causing maximum damage to a car while inflicting minimum harm to occupants are becoming more common. Passenger seats from the vehicle are then sold to the highest bidder. The purchaser now has supporting evidence for fabricated claims of hard to disprove injuries, such as neck and back pain. Many view this as an easy path to long term benefits, with claims of disability sweetening the pot beyond what can potentially be accrued for a settlement.

These con artists can end up raking in benefits and settlement money from multiple directions, claiming ongoing treatments for injuries never suffered, in addition to the loss of income from jobs they never held.

Money can be paid out for ‘medical professionals’ and ’employers’ to keep up the façade and increase both the amounts and longevity of such payouts. Health care groups looking to inflate their own profits can coach such passengers on how to convincingly exaggerate their injuries, in exchange for compensation. They can also bill insurance companies for additional treatments based on the supposed ‘diagnosed’ injuries.

Others can benefit from staged crashes as well: local tow truck companies in on the deception can bill insurers for the illegitimate collision, padding the bill with fees for additional wait times, clean up, or the use of specialized equipment.

A portion of such gains can be kicked back to other parties who are tangentially involved. Collision repair shops may cause additional damage to vehicles brought in for repair. In doing so, they are further inflating the claims while pocketing extra dollars awarded for repairs that can be easily covered up.

Who is really hurt by all of this fraud?

Many Canadians might think it’s little more than a problem for the insurance companies. But it isn’t.

A study by KPMG found that in Ontario alone, the annual cost of auto insurance fraud totalled more than $1.6 billion. That means roughly $230 of the average yearly car insurance premium paid by the average Canadian consumer goes to covering fraudulent claims.

How do insurance companies cope with this annual loss?

By raising premiums across the board meaning honest, hard-working Canadians who are bearing the real cost of fraud.

How can fraud be stopped?

According to Forgeron, stronger anti-fraud measures and harsher penalties for committing insurance fraud must be instituted, or the average insurance policyholder will continue to pay the price.

“We are just beginning to understand the many benefits of having insurance companies work together to reduce fraud. We’re spotting trends that we couldn’t see before – when each company was trying to solve this problem on its own. To ensure this collaboration happens more often, we are working on establishing a framework that encourages insurers to share information for the purposes of fraud detection.”

Forgeron wrapped up his recent talk with an appeal to the public to be part of the solution:

“One specific way in which you may be able to assist is through the government’s new Serious Fraud Office. We were encouraged when the previous government created this office – and relieved when the new government said they’d continue with it. The government has made it clear that it is willing to develop a fraud reduction strategy. That it’s willing to listen when law enforcement comes forward with information about serious fraud in Ontario… Each of us can do our part. If we do… when we do… we’ll be able to protect public safety better and deliver meaningful cost savings to people across our province.”

Don’t pay more than you have to for car insurance. Compare car insurance quotes online at and find the lowest rates for the coverage you need.

Related Topics

Auto Insuance / Insurance

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