Fraud in the insurance industry is evolving into an increasingly serious problem, with fraudsters leveraging online platforms to prey on unsuspecting customers. Recently, Aviva Canada alerted the sector to ongoing fraudulent operations involving a so called ‘ghost broker’ claiming to be affiliated with the firm. What’s more, Aviva Canada also reported a worrying 39% increase in detected fraudulent claims from 2022 to 2023.
For Ryan Fowler (pictured), owner of Insureline Brokers (Premier), the rise in fraudulent brokers, particularly those offering false policies and pocketing the proceeds, is alarming.
“I definitely see a rise in scams. We see it with everything,” Fowler told IB. It’s a trend that has swept across industries, from the CRA scam cases during tax season to sophisticated fraudsters within the insurance sector. And, with affordability becoming a key issue, fraudsters capitalize on offering policies at prices that seem too good to be true, targeting cost-conscious buyers.
Insurance brokers bear the brunt of the reputational fallout from these scams. Even though fraudulent activities may not be connected to legitimate brokers, the public struggles to differentiate between a scammer and a licensed broker.
“We can take a lot of that blame directly, even though we have nothing to do with it,” Fowler added. “Online sales isn’t going anywhere... it’s going to be increasing with technology.”
One significant concern for Fowler and his team is educating consumers about the potential risks of fraud. He cited a personal experience where a client was unsure whether to trust the insurance broker handling their case.
“I had one lady in particular, [she] said to me: ‘I don’t know if this person is real. Does he actually work for an insurance company?’” Fowler explained - highlighting the skepticism that clients now have about the legitimacy of brokers, especially when interacting online. To reassure the client, Fowler had to personally walk her through the verification process, showing her the company’s office and how to check broker licensing information.
However, the risk of fraud is not just an online issue. The rising cost of insurance, especially auto insurance in regions like Alberta, exacerbates the problem.
“Auto insurance is definitely an issue here in Alberta, so I can see fraudsters taking advantage of that,” Fowler said.
When discussing the broader implications of insurance fraud, Fowler touched on the reputational damage it inflicts on the industry as a whole. “Claims don’t always go right, and you tend to hear about the negative points rather than the positive impact insurance has,” he said.
The negativity surrounding fraudulent claims adds another layer of mistrust between consumers and legitimate insurance companies or brokers. Fowler stressed that the industry’s ability to recover from this reputational hit depends largely on proactive measures from both insurers and broker associations. He suggested that “insurance companies, maybe even broker associations, [need] to educate the general public on some of these scammers to kind of separate us from them.”
At the heart of the issue, however, remains the need for consumer education.
“How do we prevent that?” Fowler asked, reflecting on the growing sophistication of scams. He believes that consumers need to be more aware of red flags, such as deals that appear too good to be true. He added that brokers should also be proactive in educating their clients about these risks. For example, verifying a broker’s licensing or the legitimacy of a policy can make a significant difference in preventing fraud. He referenced how his own company helps clients through this process, suggesting that broader initiatives, such as a campaign led by broker associations, could increase public awareness.
While Fowler remains concerned about the escalating risk of fraud, he’s also optimistic that new technologies, such as AI, may help detect and prevent fraudulent activities in the future.
“Maybe AI will help in the future with that,” he said, referring to the possibility of using technology to verify broker credentials or track suspicious activities.
In the end, fraud in the insurance industry is not an isolated issue but part of a larger trend affecting multiple sectors. As Fowler sees it, brokers must work harder than ever to maintain trust with their clients while navigating a landscape fraught with risks.
“It can be difficult to provide insurance documents directly from the insurance company when you are doing the initial sale. Many documents cannot be accessed until the following day,” he said, referring to the challenges brokers face when trying to prove their legitimacy to skeptical clients. By fostering greater transparency and providing educational resources to consumers, Fowler hopes to combat the growing threat of fraud in the industry, ultimately protecting both brokers and clients from falling victim to these schemes.
