What is the punishment for insurance fraud in Canada?

Insurance exists to help Canadians in their time of need. But for that system to work, you need to be honest and transparent with your provider, especially when submitting a claim. While it’s normal to occasionally forget a detail or make an honest mistake, there’s a big difference between an honest error and committing insurance fraud. 

Have you ever wondered what happens if you file a false insurance claim in Canada? Here’s what you need to know. 

What is insurance fraud? 

In Canada, insurance fraud is taken seriously. The government defines it as the act of intentionally filing a claim to obtain money from an insurance company. There are many types of insurance fraud, but one of the most common is false claims fraud. 

What is false claims fraud? 

False claims fraud happens when someone submits a claim under false pretenses. In simple terms, if you make up an incident or exaggerate damages and submit a claim, you’re committing false claims fraud. 

Some common examples include: 

• Staging an accident or injury
• Submitting a claim for an incident that didn’t happen
• Providing incorrect or misleading information on a claim 

Why do people commit insurance fraud? 

While we can’t fully know what drives someone to commit insurance fraud, a few common reasons stand out. 

Most often, fraud is motivated by money. But sometimes, experts say, it can also be fueled by spite. For example, if someone feels wronged or mistreated by their insurance provider, they might be tempted to retaliate by filing a false claim. 

Insurance fraud might seem tempting, but it’s never worth the risk. If you’re unhappy with your provider, the safer route is to shop around. A licensed advisor can help you find competitive policies without putting you at risk of legal trouble. 

Rising insurance fraud in Canada 

Insurance fraud is increasing across the country. Data from Aviva Canada shows a 76% rise in claim fraud investigations in 2024, with auto-related incidents accounting for 67% of all claim fraud investigations the previous year.  

The financial impact is significant. According to the Équité Association, insurance crime, including auto theft, staged collisions, medical services fraud, and identity theft, is estimated to cost Canadians between $3 and $5 billion annually. The Insurance Bureau of Canada (IBC) adds that fraud drives up premiums by more than $1 billion each year, placing additional strain on healthcare, emergency services, and court systems. 

Matt Dillon, EVP of National Operations for Surex, points to another example of fraud uncovered in industry audits: 

“Some preferred vendors were putting in fake orders for work that wasn’t being done or parts that were supposed to go on cars, but were just being saved in inventory.”  

Fraud tactics are evolving, so Canadians need to stay informed. Aviva Canada data highlights five types of fraud on the rise: 

1. Vehicle theft and reVINing: Vehicle theft remains above pre-pandemic levels, with a 58% increase in investigations in late 2024. Stolen vehicles may be shipped overseas or resold in Canada with altered VINs and false documents. 
    
2. Staged auto accidents: False auto accidents are becoming more frequent and sophisticated. Brampton, Ontario is a particular hotspot.  
    
3. AI-enabled falsified or forged documents: Fraudsters are using AI to edit or create documents and photos that support false or inflated claims.  
    
4. Ghost brokers: Some people pose as licensed insurance brokers to sell fake policies or manipulate information for lower premiums. This leaves consumers without valid coverage. Canadians should verify brokers through provincial registries and confirm insurance directly with the provider. 
    
5. Policy misrepresentation: Some policyholders omit or misstate key information, such as their true address, the intended use of a vehicle or property, or ongoing renovations.  

Fraud doesn’t just affect the insurance companies. Honest policyholders end up paying more because insurers raise premiums to offset losses. 

“It has a huge ripple effect because every dollar paid out is ultimately coming from all policyholders,” says Dillon. 

How insurance companies investigate claims 

As fraud becomes more sophisticated, insurance providers have developed advanced ways to detect it.  

“Carriers look at photos, timelines, and patterns,” explains Dillon. “Adjusters can spot when evidence seems manufactured.”  

AI and predictive analysis are increasingly used to identify anomalies before claims are paid. 

“It’s being run through a system to make sure that everything checks out.” 

Insurers also monitor patterns over time.  

“From an underwriting perspective, it raises eyebrows if someone has three theft claims in five years, or high-ticket items that are repeatedly going missing. Habitual patterns are a big indicator.” 

At the broker level, relationships with clients help flag suspicious claims. Dillon notes, “I like to think that most people mean well. Most times, people just want to be put back into the same position they were in prior to any loss. Rarely are they trying to come out on top.” 

Ramifications of false insurance claims in Canada 

If a fraudulent claim is discovered, the consequences can be serious. They depend on the severity of the incident, but may include: 

• Loss of coverage: Individuals found guilty of insurance fraud will not receive financial coverage from their provider, regardless of whether an incident actually took place. 
   
• Policy cancellation: Providers can cancel your insurance, leaving gaps in coverage and making it harder to get a new policy. 
   
• Legal fees and damages: Insurers may sue to recover costs from a fraudulent claim. 
   
• Jail time: Under the Criminal Code of Canada, fraud over $5,000 is an indictable offense, and those convicted can face up to 14 years in prison. This is rare and usually only for significant fraud. 

“You’re stating facts that weren’t true, and that follows you,” says Dillon. “It makes it extremely challenging to get a future policy.” 

Even minor exaggerations can leave a mark on your insurance history.  

“It’s your scarlet letter.”  

Protecting yourself from insurance scams 

Fraud isn’t limited to false claims. Canadians should also watch out for scams: 

• Fake agents or salespeople: Ensure your agent is licensed and doesn’t use high-pressure tactics. 
   
• Compromised providers: If you suspect illegal activity from an insurance company, report it to local authorities or your provincial regulator. 
   
• Email scams: Watch for emails with typos, inconsistent fonts, suspicious addresses, and promises that sound too good to be true. 

Honesty is the best policy 

The consequences of insurance fraud are serious, and technology is making it harder to get away with. Dillon warns, “It’s going to become increasingly hard to set up a policy if you’re not truthful. AI is checking claims, verifying images, even assessing vehicle damage. Don’t try it. You’re going to get caught.” 

Honesty and transparency protect you, your coverage, and your fellow Canadians. If you have questions about filing a claim, contact your provider. They can walk you through the process and help you make sure your claim is accurate and complete. 

Insurance is meant to put you back in the position you were in before a loss. There’s no shortcut, and committing fraud isn’t worth the risk.