For years, auto theft has plagued major cities across Canada. However, preliminary reports suggest that auto theft in Canada has decreased in 2024. Taking its place is automotive application fraud, which professionals are citing as “a different type of auto fraud.” So, what exactly is automotive application fraud? Just how bad is the issue getting? Let’s take a look.
Automotive application fraud: What is it?
Automotive application fraud is conducted by falsifying credit applications. Since 2023, Ontario has experienced the most significant increase in these fraud rates. This has doubled since the second quarter of last year. As a whole, Canada has seen a 54% increase in automotive application fraud, contributing to the prevalence of identity theft in Canada. According to Equifax Canada, first-party fraud is the most prevalent type of automotive application fraud. This is when borrowers knowingly use their personal information to commit fraud.
“Automotive fraud is a significant pain point for both businesses and consumers,” says Carl Davies, head of fraud and identity at Equifax Canada, a consumer credit reporting agency in Canada. Their recent press release highlighted the ongoing issue of automotive application fraud. “This deceit may provide short-term financial gains for the consumer, but certainly can lead to long-term consequences such as loan denials, damaged credit, and legal ramifications.”
In credit applications, the amount of identity theft continues to grow. According to Equifax Canada’s data, 48.3% of all fraud applications have been flagged as identity fraud in 2024. This is an increase compared to 2023’s 42.9%. Adding to the issue of automotive application fraud is the increase in synthetic identity fraud. This is where criminals use a combination of real and fake data to create new identities. Since 2023, the percentage of synthetic fraud has risen by 8%.
Ontario seeing a decrease in auto thefts
Though fraudulent credit and automotive applications continue to surge in Canada, auto theft appears to be going in the opposite direction. According to Équité Association, National auto theft trends decreased by 17% in the first half of 2024 in comparison to 2023.
Ontario and Quebec saw the most significant decreases in the country, down 14% and 36%, respectively. Équité attributes this decrease to a strong collaborative effort between law enforcement, the Canada Border Services Agency, and government stakeholders. Aviva CEO, Tracy Garrad, told the Canadian Underwriter recently that, “Ontario, in particular, was very responsive to the issue.”
Équité reported in the first half of 2024 that Atlantic Canada was seeing an increase in auto theft of around 11%. This is likely tied to the strong measures in place to combat auto theft in provinces such as Ontario and Quebec. Still, auto theft claims today are costing insurers a record-breaking $1.5 billion in 2023, up from $1.2 billion in 2022, which was also a record at the time. For consumers who bear these additional costs on their policy premiums, this is an average of $125 per policy.
For now, as automotive application fraud continues to rise, it is important to do what you can to keep your insurance rates low. Contact us today or request a quote with our trusted insurance brokers.
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