Home insurance fraud contributes to higher premiums

Insurance fraud has become a big (and costly) problem for both home and auto insurers. According to the Insurance Bureau of Canada (IBC), it costs Canadians $3 billion a year!*

Insurance fraud is not just committed by professional criminals. Insurance fraud can be committed by anyone.  Some people think that insurers can afford to pay for fraud, but that’s not the case. Did you know that insurance fraud inflates insurance premiums for all consumers? The IBC estimates that we all pay about 15% more for our insurance because of fraudulent claims.


Types of home insurance fraud:


False declaration when purchasing an insurance policy. The information you provide to your broker when purchasing your insurance policy must be accurate.  This information:

  • allows your broker to offer you the insurance coverage that best meets your needs at the right price.
  • represents what you would be covered for if you have a claim.

Unfortunately, some people do not disclose information that is essential to ensure that they have the right insurance coverage, which can result in their claim being denied or their policy being cancelled.


Omission of new information at the renewal of an insurance policy. Life is always changing and it’s normal for new circumstances to arise, which may affect the type and amount of insurance coverage you should have on your policy. When a new life situation or event arises, it’s important to advise your broker so they can update the information on your record.  If the information on the insurance policy has not been updated when a claim occurs, you may not have appropriate coverage and the insurer may deny your claim.

Take a hypothetical example. When renewing your policy, you don’t tell your broker that you have just purchased a German Shepherd. If your dog bites someone or causes damage to the property of others, your insurer can deny your claim because you have not declared this new risk.


And there are a lot of examples.


False declaration after a claim. Intentionally exaggerating one's declaration of damage is fraud. Yet, it is a relatively common practice. Fraudsters see it as an easy money opportunity. Unfortunately for them, if fraud is suspected, an investigation may follow. To counter this type of fraud, insurers call on claims adjusters to investigate the cause of the claim and to determine if the claim is valid. Did you know that there are over 300 indicators of potential fraud, both at the underwriting stage and at the time of the claim? If it turns out that the claim is fraudulent, it can be denied by the insurer who could also terminate the insured’s policy.


Contractor who overcharges the restoration cost to the insurer. Suppliers (mechanics, contractors) who overcharge are often in the headlines. Fraudulent entrepreneurs tell themselves that insurance companies can afford to pay. To avoid this type of fraud, your Aviva insurer created the Premiere Network, a network of approved and hand-picked restoration specialists based on quality and customer service criteria.

As you can see, home insurance fraud can occur in many ways. One must be able to distinguish intentional false statements from those made in error or in good faith. An inaccuracy, omission or error may be made in good faith without intent to defraud. After all, we are not all insurance experts. That's why your insurance broker is here to advise you.


Finally, don’t believe that insurance companies find the slightest excuse to avoid paying their clients’ claims. On the contrary, as stated in our January 2019 newsletter, Aviva Canada paid 98% of the home and auto insurance claims received in 2017, totaling $4 billion. This dispels the widespread myth that all insurance companies like to collect premium dollars from customers, but don’t pay customers’ insurance claims when they happen.



*Home and auto insurance fraud combined.



Insurance Bureau of Canada


The content in this article is for information purposes only and is not intended to be relied upon as professional or expert advice. Aviva and the Aviva logo are trademarks of Aviva plc. and are used under licence by Aviva Canada Inc. and its subsidiary companies.