Guarding the gates: benefits fraud uncovered

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With fraud rising and schemes growing more complex, Sun Life is betting on analytics, vigilance, and human expertise to safeguard workplace benefits

IT RARELY makes headlines, but the impact is real: every year, benefits fraud quietly drains hundreds of millions from Canadian businesses, hiking costs for employers and eroding trust in workplace plans. In a landscape where one in five Canadian businesses admits to knowing someone who has intentionally submitted a fraudulent claim, the risk isn’t hypothetical – it’s embedded in the system itself. “Fraud doesn’t just happen somewhere else; it’s an everyday risk,” says Shelley Frohlich, director of fraud risk management at Sun Life. “And as schemes become more sophisticated, the industry response has to evolve just as quickly.” Frohlich’s warning is backed by data and experience. According to the Canadian Life and Health Insurance Association, group benefits fraud costs the Canadian economy up to $1.2 billion to $6 billion each year.

A market leader in group benefits, Sun Life provides coverage to over five million employees and their dependents. Each year we support the healthcare needs of Canadians with more than 80 million claims paid. We’re dedicated to delivering industry-leading products and wellness solutions. Sun Life has operations in a number of markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia, Singapore, Vietnam, Malaysia, and Bermuda.

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benefits fraud can happen in a number of ways

Service providers or their staff may submit claims without your knowledge for services they never provided

“When fraud happens, our response is immediate. But we also take time to analyze every incident. What went wrong? Where did the scheme originate? How can we close that gap for the future?”

Shelley Frohlich, Sun Life

The true danger, Sun Life warns in its recent guide for plan members and sponsors, isn’t only financial. Every fraudulent claim – whether it’s a falsified receipt or a provider waiving a patient’s out-of-pocket portion – chips away at the sustainability of benefits plans. Left unchecked, these schemes force employers to scale back coverage or pass on higher premiums to employees, penalizing the honest majority for the actions of a few.

The modern fraudster is not always a lone unscrupulous provider or rogue employee. Increasingly, schemes are collaborative, digitally enabled, and difficult to spot. Some exploit the system through false claims or collusion, while others leverage more deceptive tactics: account takeovers, phishing schemes, or cyberattacks that aim to access or alter personal data. “We’ve seen attempts where fraudsters call plan members pretending to be from the insurance carrier, gather sensitive information under false pretenses, and use that to change banking details or breach accounts,” says Frohlich, who’s spent 15 years at Sun Life specializing in group benefits fraud. The battle is won through constant adaptation, and she stresses that Sun Life’s approach is not merely to react but to anticipate.

The company has built what is widely regarded as one of the largest and most capable fraud risk management teams in the Canadian benefits industry, setting the standard for both scale and sophistication. Boasting a fraud response that’s intentionally multilayered, data scientists, healthcare analysts, and former law enforcement officers work in tandem, blending traditional investigative tactics with advanced analytics. “Our analytic capabilities are built in-house, which lets us pivot quickly as new schemes appear,” Frohlich explains. And while predictive modeling, artificial intelligence, and real-time behavioural analysis are indisputably powerful, flagging anomalies that would slip past even the most vigilant human

reviewer, Sun Life’s approach is as much about people as it is about machines. These trained investigators can spot suspicious activity – that algorithms might overlook. “We have teams out in the field, not just behind desks,” Frohlich notes. “Their intelligence feeds back into Sun Life’s system, sharpening future detection.”

If technology is the engine of modern fraud prevention, employers – specifically HR professionals – are the first line of defense. Sun Life’s experience shows that the most robust plans, with the most attractive coverage, often become targets for abuse. “We see it all: spikes in claims for certain services, improper coordination of benefits by plan members and providers, or sudden upticks from a single clinic,” says Frohlich. “It’s rarely random.” The insurer’s investigations have unearthed a range of schemes: service providers waiving co-pays, offering improper incentives, or billing for services never delivered; plan members coordinating false claims; and even collusion between entire networks of providers and patients. For HR leaders, the warning signs can be subtle – an unexpected increase in one type of claim, members with multiple plans failing to properly coordinate benefits, or employees submitting highly similar receipts.

Where did the scheme originate? How can we close that gap for the future?” This mindset of continuous improvement is critical. Sun Life’s teams conduct post-incident reviews, enhance controls, and monitor for repeat offenders – such as delisted providers attempting to re-enter the network under new names or at new locations. “If a provider is delisted for fraud, they may try to resurface somewhere else. Our programs are designed to detect those attempts and keep them out.” This culture of learning extends to industry partnerships. Sun Life collaborates with regulatory bodies, law enforcement, and peer insurers to share intelligence and coordinate on emerging threats. Frohlich says, “The more we work together as an industry, the more effective we’ll be.” Recovery, she adds, isn’t just about clawing back funds or blocking one scheme – it’s about restoring faith in the system. “When fraud is stopped, we reinforce the value of these plans. We show employers and employees alike that we’re not passive. We’re protecting what matters, employee access to health benefits and costs to employers.” To learn more on managing fraud in benefits plans, click here.

business man blocks falling blocks with his hands to prevent domino effect

A multilayered defence: from data science to field investigations

Fraud’s front lines: what HR needs to know

Published May 12, 2025

“We’re seeing a clear shift. What fraud was is not the same as fraud today. It’s not just about fake receipts anymore. It’s about identity theft, account takeovers, and hackers trying to access confidential health and financial data”

Shelley Frohlich, Sun Life

Individual plan members can also commit fraud independently by submitting false claims

Third parties can also commit fraud, typically through the unauthorized use of a service provider's name

Receiving a spa treatment such as a facial and billing it as a therapeutic massage

examples of benefits fraud

Plan members and service providers may work together to submit claims for products or services that are covered while receiving products or services that aren't covered. This could include:

Receiving running shoes/dress shoes and billing them as orthotics

Receiving designer sunglasses and billing them as prescription eyewear

Receiving teeth whitening or a cosmetic service and billing it as a regular dental care

“It’s essential for employers to be alert to patterns, not just outliers,” Frohlich notes. “A sudden jump in massage therapy claims, or a provider promising ‘no out-of-pocket costs’ – these should all trigger a closer look.” Sun Life’s response is not to act alone but with plan sponsors as partners. When fraud or abuse is detected, plan sponsors receive detailed findings and are encouraged to make their own decisions on employment action. “Especially with collusion cases, it’s vital that we’re aligned with employers,” she says. “Interviewing plan members together, sharing insights – these partnerships have made the biggest impact.” The insurer’s delisting program – removing high-risk providers from its network – is perhaps its most powerful lever. “By quickly delisting providers and facilities where abuse is found, we’re protecting both the integrity of the plan and the bottom line for employers,” says Frohlich. Since launching the initiative in 2014, Sun Life estimates that Canadian employers have saved over $300 million collectively. “And it’s not just about money. It’s about trust.”

The migration of benefits management to digital platforms has made convenience much easier, but it has also opened new doors for fraud. Sun Life’s fraud risk management team now tracks a rising tide of cyber scams, phishing attempts, and digital deceptions targeting plan members and administrators. “We’re seeing a clear shift,” Frohlich says. “What fraud was is not the same as fraud today. It’s not just about fake receipts anymore. It’s about identity theft, account takeovers, and hackers trying to access confidential health and financial data.”

The new frontier: cyber threats and systemic risk

The insurer’s response has been to harden its digital perimeter: multifactor authentication, regular threat assessments, and a layered approach to cybersecurity. Frohlich maintains, “Education is critical. Members need to know how to spot suspicious emails, safeguard login credentials, and never share account details with anyone.” Sun Life’s member-facing fraud guide emphasizes the basics: scrutinize every receipt, confirm services were received as claimed, and never hesitate to ask questions – whether of a provider, HR, or the insurer itself. Despite the sophistication of its defenses, Sun Life’s team knows that no system is impenetrable. “When fraud happens, our response is immediate,” Frohlich explains. “But we also take time to analyze every incident. What went wrong?

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