False Insurance Claims Punishment in Canada

Insurance companies exist to help Canadians in their time of need.

However, you need to be honest and objective with your provider for this agreement to work, especially during the claim-making process.

It's relatively common for the average person to occasionally forget a detail or make an honest mistake — but there's a significant difference between making a simple error and committing insurance fraud.

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Have you ever wondered what happens when you file a false insurance claim in Canada? If so, you can find the answer to your question below.

What is insurance fraud?

When it comes to insurance fraud Canada has a very cut-and-dry stance on the matter. The Canadian government defines insurance fraud as the act of purposely filing a claim with the intent of obtaining payment from an insurance company.

There are several different types of insurance fraud; however, one of the most common is false claims fraud.

What is false claims fraud?

False claims fraud is the act of submitting a claim under false pretenses. In layman's terms, if you make up a fake incident or event and submit a claim to your provider, you're technically committing false claims fraud. 

Some common examples of false claim fraud include:

• Staging an accident or injury
• Submitting a claim regarding an incident that didn't occur
• Submitting a claim with incorrect information

Why do people commit insurance fraud in Canada?

Although we can never completely understand why fraudsters behave the way they do, there are many theories.

For instance, most people feel that fraudsters do what they do purely for monetary gain.

However, some experts believe that these acts are often committed out of spite or vengefulness. For example, if an individual felt like they were wronged or mistreated by their insurance provider, they may feel tempted to seek revenge by filing a false claim.

As enticing as this may sound, it's a risk that's never worth taking. If you're unhappy with your current insurance provider, you may want to consider shopping around. Countless insurance providers offer fantastic plans at various rates that are bound to exceed your expectations.

If you're having a hard time finding the right option for you and your family, don't hesitate to reach out to one of our insurance advisors. Our licensed advisors can help you find and compare Canada's most competitive insurance quotes. Best of all, our team works fast — we can provide you with ten personalized quotes in just ten minutes!

False insurance claims punishment Canada — what are the consequences?

If you are caught filing a false claim in Canada, you can expect to receive an insurance fraud punishment. The type of punishment that you receive depends on the severity of the incident.

Generally, the consequences for filing a false claim include the following:

Loss of coverage

According to the insurance fraud Canada penalty regulations, individuals that are found guilty of insurance fraud will not receive any form of financial coverage from their provider, regardless of whether an incident took place or not.

Policy cancellation

If you commit false claims fraud in Canada, your insurance provider has the right to cancel your policy. Although this may not sound like a significant punishment for insurance fraud, having a gap in your insurance history can lead to issues in the future.

For instance, if your auto insurance policy gets cancelled, you won't be able to drive until you reobtain coverage. Additionally, finding a new provider after an insurance cancellation will likely be difficult — this is due to the fact that insurance companies see gaps as a red flag.

As a result, prospective carriers are less likely to provide you with a new policy. If you do manage to find a new provider, you'll likely need to get high-risk insurance, which is considerably more expensive than traditional options.

Legal fees

Aside from losing coverage, your insurance provider may sue you over costs or damages related to the incident.

Jail time

Lastly, if you're found guilty of committing false claims fraud, you may have to spend time in jail.

Who gets affected by insurance fraud?

You may think that insurance companies feel the lion's share of the financial burden; however, this isn't the case. The real victims of insurance fraud are the honest policyholders.

When someone files a false claim, it costs their insurance company thousands of dollars to deal with. In order to regain their capital, insurance providers have no other choice but to spike up their prices. In turn, honest policyholders end up paying more.

Protecting yourself from insurance scams in Canada

Insurance fraud isn't the only issue that you should be aware of. We urge you to contact the authorities if you come across one of the following insurance scams in Canada:

Fake agent or salesperson

We strongly suggest that you avoid doing business with a salesperson that doesn't have the proper credentials or uses high-pressure sales tactics. Most often, these "salespeople" are fraudsters looking to make a quick buck.

Compromised agent or salesperson

If you reason to believe that your insurance provider is involved in illegal or fraudulent activities, don't hesitate to contact the local authorities or your provincial insurance regulator.

Email scams

In today's digitally-influenced world, email scams are starting to become an everyday occurance. It's not uncommon for fraudsters to disguise themselves as insurance agents and send out mass amounts of spam emails.

These emails will encourage readers to change their policies by offering services that often sound too good to pass up. However, falling for the tricks can lead to a wide array of issues, leading from compromised data to stolen funds.

If you ever receive a suspicious email from someone claiming to be an insurance agent, keep an eye out for the following details:

• Typos or spelling errors in the email
• Inconsistent fonts
• Email address is vastly different from other agents at the same company
• Makes promises that sound too good to be true
• Uses high-pressure sales tactics

Committing insurance fraud is never worth it

We hope that learning the consequences of committing insurance fraud has encouraged you to be honest and objective while making future claims.

If you have any questions about making an insurance claim of any kind, don't hesitate to contact your provider. Your insurance provider can walk you through the process and answer questions you may have.