A new survey from analytics firm FICO suggests that Canadian insurers may be facing heightened exposure to application fraud as economic pressures reshape consumer behavior.
The 2025 Consumer Survey: Fraud, Identity and Digital Banking CA found that nearly one in three respondents viewed first-party fraud, such as misrepresenting personal information during financial applications, as acceptable under certain conditions.
Insurers, particularly those involved in personal lines such as auto and home, rely on accurate disclosures to assess risk and price coverage. But the survey findings indicate that a growing number of applicants may be more willing to withhold or falsify information in order to secure more favorable terms, often citing inflation and rising living costs as justification.
While much of the fraud discussion has centered on banking, the implications for the insurance sector are significant. Misstated vehicle usage, underreported mileage, and undisclosed drivers are among the common forms of application fraud in personal auto insurance. In property insurance, inaccurate valuations and concealed claims history can distort underwriting decisions and loss ratios.
As digital onboarding becomes more common across financial services, insurers are also navigating how to implement ineffective identity verification without introducing friction that could deter potential policyholders.
FICO’s survey showed that nearly 50% of respondents experienced more frequent ID checks during financial transactions. A portion of users said these checks had caused them to reduce or stop using certain accounts altogether.
For insurers, this highlights the need to balance fraud detection tools, such as digital identity solutions and behavioral analytics, with a smooth customer experience. Increased verification is vital for preventing ghost broking and synthetic identities. However, if the process becomes too complex, it may undermine direct-to-consumer distribution efforts.
The survey also revealed rising concerns about identity theft. Six percent (6%) of respondents reported that their identity had been stolen and used to open a financial account, up from 5% in 2023. This suggests increased exposure to third-party fraud, which can affect insurers through fraudulent policy issuance or false claims.
Insurers offering identity theft protection or cyber insurance products may see growing demand. At the same time, they must contend with evolving fraud tactics that could exploit weaknesses in digital processes.
Although 71% of respondents cited fraud protection as a top-three consideration when opening a new account, 40% believed it was unlikely they had ever been targeted. Nearly a quarter were confident their identity had never been misused.
This disconnect presents both a challenge and an opportunity for insurers. While low personal risk perception may hinder uptake of fraud-related coverage, it also highlights the need for stronger consumer education around digital risks. Insurers that invest in proactive engagement and adaptive fraud controls will be better positioned to respond to a shifting threat landscape.
