How can brokers help combat auto insurance fraud?

Auto insurance fraud is a persistent and costly issue that affects everyone, including insurers, policyholders, and the broader industry. Fraudulent claims raise premiums across the board, strain insurer and law enforcement resources, and can erode customer confidence. In Canada, fraud is estimated to cost policyholders $1 billion annually, according to the Insurance Bureau of Canada. While the number is staggering, they also highlight an opportunity for brokers to provide crucial support in combatting fraud.

Brokers are often the first point of contact for customers, which uniquely positions them to detect suspicious activity early, educate policyholders, and help prevent fraud before it escalates.

What is insurance fraud?

Insurance fraud involves any deliberate deception for financial or personal gain. It can include lying on an application, exaggerating damages, or even staging entire collisions. Fraud may be committed by individuals or as part of large-scale, organized crime rings.

Types of insurance fraud

Fraud generally falls into two categories:

• Opportunistic fraud: Often spontaneous, such as claiming pre-existing vehicle damage after a real accident or inflating repair costs.
• Premeditated fraud: Planned and may involve multiple parties staging collisions or creating fake documentation.

Regardless of type, all fraud increases costs and undermines public trust.

Common auto insurance fraud tactics

Today’s fraudsters use a range of tactics ranging in complexity, including, but not limited to:

• Staged collisions: carefully choreographed crashes involving complicit parties.
• Rate evasion: Misrepresenting details (e.g., where a car is kept) when obtaining insurance quotes to secure lower premiums.
• Identity theft: Using stolen names or driver’s licenses to initiate or cash in on policies.

Vehicle theft and VIN manipulation

Vehicle-related fraud continues to grow in complexity, with organized crime groups using increasingly sophisticated tactics to profit from stolen vehicles. One common method is VIN cloning, where a stolen vehicle is assigned the VIN of a similar, legally registered car to mask its identity. Another is re-VINing, which involves swapping the VIN with one from a salvaged or junked vehicle. In some cases, fraudsters go a step further by creating entirely fictitious VINs that don’t correspond to any real vehicle. These vehicles may be sold to unsuspecting buyers, used to file false insurance claims, or exported overseas. Brokers who understand these tactics are better positioned to detect red flags early and help protect their customers.

What actions can brokers take to mitigate auto insurance fraud?

Brokers play a key role in the fight against auto insurance fraud, acting as trusted advisors as well as risk spotters. Brokers are often the first to hear about suspicious losses or unusual documentation. By asking the right questions, verifying information, and reporting inconsistencies early, brokers can prevent fraudulent claims from progressing. Equally important is educating customers about what constitutes fraud and its consequences, not only for insurers but for honest drivers who bear the financial burden.

In addition to taking a diligent approach when quoting and supporting customers during the claim submission process, there are several proactive strategies brokers can leverage to prevent auto insurance fraud, including, but not limited to:

• Request complete documentation: Photos, bills of sale, registration, and identification.
• Verify vehicle information: Use manufacturer tools or recall databases to validate VINs.
• Ask follow-up questions: If something feels off, don’t hesitate to dig deeper.
• Stay informed: Be aware of new scams and trends in your region.
• Collaborate: Work closely with underwriters, loss prevention teams, SIUs, and industry groups like the Équité Association.

Fraud prevention is a shared responsibility. By staying alert, asking the right questions, and leveraging available resources, brokers can play a key role in protecting both their customers and the industry as a whole.

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Copyright © 2025 Echelon Insurance. All rights reserved. This article is provided by Echelon Insurance (“we”) for general information purposes to help brokers and their customers understand auto insurance fraud classifications and the important role brokers play in insurance fraud prevention. While we endeavour to be accurate and up to date, this information is provided “as is” and we cannot guarantee it is complete or that implementing the recommended loss prevention measures will have the desired results.   

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