What Do You Know about Car Insurance Fraud?

August 4, 2025

Car insurance fraud is a crime in Canada and it’s estimated to cost Canadians $1 billion a year. The result is usually higher insurance rates for drivers because insurance companies generally pass on losses from fraudulent claims.

As car insurance fraud tactics become more sophisticated, so do the efforts to detect and prevent them. We’ll take a look at the top efforts by car fraudsters.

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Vehicle theft and ‘re-VINning’

One of the most concerning fraud trends is the practice known as “re-VINning.” This involves stealing a car, removing its original Vehicle Identification Number (VIN), and replacing it with a fake or cloned VIN from another vehicle. The goal is to disguise the car’s true identity so it can be sold to unsuspecting buyers.

While many stolen vehicles are shipped overseas, a growing number are now being resold right here in Canada, often through online marketplaces. Buyers who unknowingly purchase a re-VINned vehicle could lose both the car and their money, and they may even become involved in a criminal investigation.

Did you know? Obtaining car insurance for a re-VINed car can be difficult and even impossible due to the vehicle's illegal history. Insurance companies typically refuse coverage for stolen or re-VINed vehicles.

Staged auto accidents

Staged accidents can also be known as “crash-for-cash” scams and they are on the rise in several Canadian provinces. They’re often organized by fraud rings and involve deliberately causing or exaggerating minor car crashes to file false claims for vehicle damage, injuries, and other expenses.

Some involve a driver intentionally stopping short to cause a rear-end collision, while others may include fake passengers who claim to be injured. In more sophisticated cases, fraudsters work with dishonest body shops or medical providers to inflate repair costs or injury treatments.

AI-enabled forged documents

With the rapid rise of artificial intelligence (AI) tools, fraudsters now have access to software that can create convincing fake documents. This includes invoices, damage photos, medical notes, and repair estimates, all of which are used to support bogus insurance claims.

These documents can bypass the basic detection processes. That’s why many Canadian insurers are investing in more advanced fraud detection systems that can identify inconsistencies and cross-check data in submitted claims.

Ghost brokers and towing scams

Ghost brokers are unlicensed individuals who pose as legitimate insurance brokers. They often sell fake insurance policies or policies that are later cancelled without the customer’s knowledge. Victims believe they’re insured until they try to make a claim and discover they’re not covered.

Towing and storage scams are also on the rise. In these cases, tow truck drivers intentionally overcharge for services or tow vehicles unnecessarily, inflating claim costs.

Underwriting fraud

Not all fraud happens after an accident. Underwriting fraud occurs when someone provides false or misleading information when applying for a policy. This includes lying about who the primary driver is, where the vehicle is stored, or omitting previous claims and tickets.

If discovered, the insurer may cancel the policy, deny claims, or report the incident to regulatory authorities.

Why car insurance fraud matters

Car insurance fraud also touches honest drivers:

• Higher premiums: Fraud increases the cost of doing business, and those costs are passed down to consumers.
• Legal risks: Buying a re-VINned vehicle or being involved in a staged accident can expose innocent people to legal trouble.
• Service delays: Fraud investigations can slow down legitimate claims processing, delaying repairs and payouts.

How insurers are responding

Canadian insurers are deploying a range of countermeasures:

• Advanced fraud detection software: Using AI and machine learning, insurers are analyzing claims more thoroughly and identifying unusual patterns.
• Industry collaboration: Insurance companies are working with government agencies, law enforcement, and industry groups to share data and intelligence on fraudulent activities.
• Policy reform and penalties: Regulatory bodies across the provinces are increasing penalties for fraud, especially in cases involving staged accidents or identity theft.
• Public education campaigns: Insurers and brokerages are helping to raise awareness among drivers so they can spot potential fraud and avoid falling victim to scams.

Protect yourself

Fraud can happen to anyone. Here’s how to reduce your risk:

• Verify brokers: Always confirm that your insurance broker is licensed in your province.
• Review your policy details: Make sure the information on your insurance policy is accurate and up to date.
• Check vehicle history: If you buy a used vehicle, get a full vehicle history report and inspect the VIN for signs of tampering.
• Watch for suspicious collisions: If you’re involved in an accident that seems orchestrated, document everything and contact your insurer immediately.
• Report concerns: If something feels off — whether it’s a fake broker or a suspicious tow truck — report it to your insurer or the Insurance Bureau of Canada.

To sum it all up

Car insurance fraud affects real people, real claims, and real premiums. If you suspect fraud or have concerns about your insurance coverage, speak to your broker or provider. Being on the offence is the best defense when it comes to car insurance fraud.

Top 5 FAQs about car insurance fraud in Canada

What is “re-VINning” and how can I avoid it?

Re-VINning is when a stolen vehicle has its identification number replaced with one from a legitimate car. This makes the stolen car appear legal and lets criminals sell it. Avoid this by checking the VIN in multiple places on the vehicle and getting a full vehicle history report before purchasing. Getting car insurance for a vehicle like this can be difficult because insurers usually refuse to insure a re-VINed vehicle.

How common are staged accidents in Canada?

Staged accidents are becoming more common, especially in urban areas. These accidents are often carried out by organized crime groups who seek to collect money through false injury claims, inflated repair costs, and towing scams. Always report accidents promptly and provide as much documentation as possible.

Can AI-generated documents really fool insurers?

Yes, some AI-generated fake documents can be extremely convincing. As a result, insurers are now using technology to spot patterns and inconsistencies in claims data that may reveal fraudulent documents. If you're unsure whether something is legitimate, always verify it with your broker.

What is a ghost broker?

A ghost broker is someone who poses as a legitimate insurance agent but sells fake or invalid insurance policies. They may use social media ads or online marketplaces to lure their victims. Work only with licensed brokers and contact the insurer directly to confirm your coverage.

What happens if I lie when getting car insurance?

If caught, your insurer may cancel your policy, deny any claims, and flag your record, making it harder to get insured in the future.