The new insurance fraud playbook 

New types of insurance fraud are beginning to rear their ugly heads, and more traditional staged accidents are spilling over from personal auto lines into personal property and commercial auto lines as well, says an expert at the Ontario Insurance Adjusters Association (OIAA) Claims Conference in Toronto. 

Emerging trends show claims fraud, such as staged flood and commercial losses, ghost brokers, revinning, towing and storage auto fraud, are becoming more mainstream within insurers’ fraud investigations, says Andy Dykstra, associate vice president of enterprise fraud for Co-operators.

Investigators are also seeing fraudulent activity occur much earlier in a consumer’s policy lifecycle. 

Underwriting fraud 

Underwriting fraud, which occurs when someone intentionally conceals or misrepresents information when obtaining insurance coverage, is catching up to the frequency of claims fraud, which happens after a policy has been issued and a consumer makes a claim. 

For insurers, the key to approaching underwriting fraud starts at the policy level. “If you can address the bad policy, you’re not going to see the bad claim,” Dykstra says. 

Insurers can improve their fraud programs by analyzing data holistically, across underwriting and CRM platforms, rather than in isolation.  

“[It’s about] synthesizing all that data to understand things like networks and trends,” he says. “It’s a data thing, and it’s a connectivity thing, that’s really become the focus in the last five years of insurers that are transforming their fraud programs.” 

There’s a 50-50 chance investigators will be able to determine conclusively when a fraud has occurred. “Of the claims we would investigate for fraud, we still pay more than 50% of those,” he says.  

Staged losses  

Insurers are constantly battling the frequency of staged car accidents. But fraudsters are now using a new tool in the toolkit, Dykstra said during a panel discussion on Emerging Trends and Challenges in the P&C Industry — staged water losses in personal property lines.  

“It’s the new arson as far as I’m concerned,” he said. “People used to burn their house down when they wanted a new house or when they were in financial difficulty. 

“You can accomplish the same thing by sabotaging the toilet on your side of the floor and going away for the weekend.” 

Staed water accidents often succeed since public authorities don’t investigate these losses, Dykstra noted. That’s because they appear to occur on their own or accidentally, unlike arson, the origins of which are easier to trace. Plus there’s little to no risk of injury for the fraudsters or authorities, unlike arson. 

“Unless your insurer, [per] the initial adjudication of that claim, is allowed to assess what happened, part of the scheme is often you don’t [get to investigate] — it’s gutted by the time you get there,” says Dykstra.  

“It’s a pretty good scheme, and you really need to look for the connectivity between claims to detect that,” he says, such as “seeing common repair vendors or connectivity between the parties or just patterns — that’s what you really need to pay attention to.” 

Lucrative staged commercial auto losses are also making an appearance in fraud investigations. 

These schemes tend to reveal multiple parties — for example, a fleet management company, a towing company, and an environmental remediation company — colluding with each other to game their insurer, Dykstra says.  

“Heavy commercial vehicles that are tipping over somewhere, and when they tip over, it’s an enormous production to get it sorted and towed. And there’s a big tow bill with that,” he says.

“Then there’s also some form of environmental catastrophe that needs to be cleaned up, and the environmental company that’s coming in to do that has some connectivity to the tow vendor and probably to the person who’s crashing.” 

“Before you know it, it’s a half million-dollar claim,” he says. “It’s a new dimension to stage losses.” 

Getting ghosted

Ghost brokers are starting to haunt Canada’s P&C insurance industry.

They are unlicensed individuals selling fake or fraudulent insurance policies to unsuspecting customers.  

“Their end game is to game that policy, or to rip off that consumer by selling them a fake policy, or selling them a policy that’s got rates generated by fraud,” Dykstra says. 

It’s a type of fraud trend that’s becoming more mainstream. “Or at least, its persistence has really changed in the last few years,” he says. “It’s not hard[-core], black-market stuff anymore. It’s people selling, in our experience, sometimes hundreds of policies — and these policies are rooted in deception.” 

Reports of ghost brokers prompted one of Canada’s largest insurers to issue warnings to customers.  

In 2024, Aviva warned clients to beware of an Alberta-based ghost broker that claimed to be affiliated with Aviva but was selling fake insurance policies. The ghost broker had advertised its scam on social media as “Allcoveredbrokers” or “AllcoveredAviva.” 

Some clients were issued fake pink slips for auto insurance after being asked to transfer money for insurance premiums, while others never heard back, Aviva said at the time. 

Auto fraud

Though it’s no surprise to P&C insurance professionals, organized crime rings are continually exploiting victims of auto theft through fraudulent activities such as tampering with Vehicle Identification Numbers (VINs).  

Revinning, in which vehicles are stolen, given a fraudulent vehicle identification number, and then sold to unsuspecting people who are defrauded of their money, continues to pop up in fraud investigations. However, now there’s another layer to it, says Dykstra. The revinned vehicles sold to unsuspecting buyers are then stolen again, meaning the fraudsters are paid twice and insurers lose money on claims again. 

“Stolen vehicles that have a fake VIN placed on them, that are now insured with your company? Almost certainly, you’re going to see a claim for that vehicle being stolen again,” he says. “It’s part of this conspiracy: get a stolen vehicle, replace it in the market, get it insured, get paid out on the insurance claim.” 

Then, the fraudster ships the vehicle overseas for another payout.  

Towing and storage fraud, which was the subject of recent legislation in Ontario, has now moved into Alberta, Dykstra said.  

In these cases, tow truck drivers or storage operators may pressure consumers who’ve just been in a collision to use a certain repair shop they’re colluding with in order to get a referral or commission fee. In some cases, these bad actors may inflate invoices or force consumers to sign a blank work order, Insurance Bureau of Canada has reported.

In Ontario, new provincial regulation has been introduced to better protect consumers from this fraud risk. However, it’s now shifted to become a “growing problem in Alberta,” Dykstra says.  

“A lot of these vendors are opening satellite operations with their expertise in Calgary and Edmonton now, and we’re starting to see those problems in a market that’s even less regulated than Ontario.” 

In Ontario, the new regulations aren’t proving to be particularly effective, said Dykstra.  

“What it’s [done is] legitimize some of the rates that we were contesting before they were deemed approved by this regulation,” he says. “So that’s sort of an element of fraud that is difficult to deal with, because the system isn’t set up to combat it in Ontario, and the system is completely unable to deal with it in Alberta.”