What is car insurance fraud in Canada?
Car insurance fraud is on the rise, but that doesn't mean you can't protect yourself ahead of time. Here's everything you need to know.

Samantha Kohn, Freelance Blogger
If you're a driver, you are legally required to have car insurance. But have you ever thought about the possibility of car insurance fraud? It may not be on your radar right now, but it's a serious problem that affects both insurance companies and honest policyholders alike.
Auto insurance protects vehicle owners from having to cover the costs associated with fixing or replacing a vehicle if it's stolen, broken into, or involved in a crash.
When a vehicle is insured, the insurance provider pays to have the damages repaired or the vehicle replaced. Depending on the policy, the insurance provider will often cover costs associated with property damages or medical care for anyone injured in the crash as well.
Unfortunately, this safeguard has become a source of fraudulent activity carried out by criminals looking to make easy money.
According to the Financial Services Regulatory Authority of Ontario (FSRA), 75% of respondents to a recent poll believe auto insurance fraud is a major concern in Ontario. And while many drivers are concerned about becoming a victim of auto insurance fraud, 56% feel they do not know enough about insurance fraud to protect themselves from falling victim.
Key takeaways on auto insurance fraud
1. Auto insurance fraud is the act of submitting false details or staging an accident in order to collect a payout. Because it's extremely costly for providers, car insurance fraud leads to higher premiums for customers.
2. There are many forms of auto insurance fraud, but common examples include intentionally crashing into a vehicle, reporting false repair costs, and presenting fake documentation.
3. Filing a fraudulent claim can lead to the cancellation of your policy. It can also lead to the need for high-risk auto insurance – a much more expensive type of coverage. In some cases, criminals may be also subject to lawsuits, large fines, and jail time.
4. There are many ways to limit your risk when it comes to car insurance fraud. Be sure to keep detailed records of your accident and carefully review your repair bill.
What is auto insurance fraud in Canada?
Auto insurance fraud is the act of submitting false information or staging a collision for the purpose of collecting insurance payouts. Sometimes everyone involved in the fraud is aware and complicit in the crime, and other times the fraudsters pull in innocent, unaware drivers or pedestrians as unexpecting victims.
Oftentimes, the criminals responsible for these fraud cases justify their actions by claiming that insurance fraud is a victimless crime. This is not the case.
Being in a collision is stressful. Not only is your safety compromised, but you’re also inconvenienced (after all, you were driving which means you had somewhere to be) and left with the onerous task of having your vehicle repaired or replaced.
Plus, any motor vehicle collision can impact your insurance rates moving forward, even if you’re an innocent victim of insurance fraud.
Insurance fraud is extremely costly for insurance providers, and that expense is eventually passed down to the consumer in the form of increased premiums.
More insurance fraud = higher insurance premiums.
This means that every vehicle owner carrying an auto insurance policy is negatively impacted by insurance fraud.
Examples of car insurance fraud
There are many types of auto insurance fraud.
Here are some of the more common scams that involve intentionally causing collisions:
Intentional target: In this situation, a vehicle and unsuspecting driver is chosen by the fraudster, who intentionally crashes into the vehicle to cause damage that will require an insurance payout.
Stopping short: Similar to the Intentional target, this is when a fraudster intentionally slams on their brakes when a vehicle is following close behind them, causing the unsuspecting driver behind them to rear-end the vehicle and cause damage.
Wave them in: In this case, a fraudster will sit in their vehicle, usually at the entrance or exit to a parking lot, and appear to be kind enough to wave and invite another driver to cut in front of them. When the unsuspecting driver moves forward to pass the waver, the waver intentionally crashes into the vehicle, making the crash appear to be the innocent driver’s fault.
Other forms of auto insurance fraud include:
- Presenting fake documentation when asked for proof of insurance after a crash
- Reporting repair costs to the insurance company that are higher than the actual cost of repair
- Claiming to have injuries caused by the collision that are either fabricated or exaggerated
- Falsely claiming that items were stolen from the vehicle
- Staging an auto theft or hiring someone to steal a vehicle so the owner can receive a payout to replace the vehicle
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What is the punishment for car insurance fraud in Canada?
Auto insurance fraud is a crime that carries significant consequences.
If a person is caught filing a fraudulent car insurance claim, the insurer will refuse to pay out the claim and likely cancel the policy. This could also flag the driver as a high-risk driver, meaning they’ll have to seek out high-risk car insurance. All drivers require insurance, and finding a new policy when you’ve been released from your old one due to fraud won’t be easy, or cheap!
The insurer can also sue the person committing the fraud for damages, which could include expenses incurred in the form of funds paid (plus interest), legal fees incurred, or wages spent investigating the case.
The fraudster could even face jail time or significant financial penalties. In Ontario, a person convicted of auto insurance fraud over $5,000 could face up to 14 years in prison.
How to avoid insurance fraud in Canada
Many people involved in insurance fraud had no intention of breaking the law. That’s why it’s so important to be diligent with your observations and documentation any time you are involved in a situation where your vehicle is damaged.
If you are in a motor vehicle collision, no matter how small, and something doesn’t feel right, it’s important not to ignore your instincts.
Be sure to keep detailed records of the event. Take photos of the vehicle, the other driver’s license plate, driver’s license, and insurance documents, and do not sign any documents or agree to any terms at the scene of the accident.
When your vehicle is repaired, carefully review the invoice from the body shop and flag anything that doesn’t look right. Contact your insurance provider with any questions or concerns.
Insurance company fraud in Canada
Aside from facing fraudulent claims, it's also important to be aware of illegitimate insurance providers in Canada. To protect yourself as a customer, you can also take measures during the purchasing process, such as:
- Selecting an insurance agent or insurance company that is appropriately licensed
- Asking questions to your insurance representative for clarity
- Double-checking the validity of your insurer by giving them a call
- Avoiding the purchase of insurance involving cash, money transfers, strange emails, or inconsistent documents
FSRA has put together an auto insurance fraud prevention checklist, so be sure to follow along in order to reduce your overall risk.
The bottom line
Insurance fraud is a major problem that can draw in unwilling participants who are completely unaware they’re involved in a crime.
One of the best ways to avoid becoming an unwilling participant in car insurance fraud is to educate yourself about the common scams going on out there.
Unfortunately, new schemes pop up all the time, so be sure to take all the steps we’ve suggested to avoid becoming involved in insurance fraud if you’re ever in a crash.
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