How much is fraud adding to your car insurance?

Published:
28 November 2012
Topic:
News,Insurance,Motoring,Car,Car Insurance

Insurance fraud comes in many guises, from exaggerated claims to dishonest policy declarations, and is a problem that is costing the insurance industry an estimated £1billion every year - a cost that adds around an extra £50 a year onto the price of every motorist's insurance policy.

The good news is that it's a problem that insurers are looking to hit head on, and new regulations such as a ban on referral fees, Continuous Insurance Enforcement (CIE) and the launch of the insurance fraud register are all helping to uncover an estimated 2,670 bogus claims every week.

However, as regulations tighten, fraudsters up their game. While CIE has successfully targeted uninsured drivers, it can do nothing to stop the 'crash for cash' scams that could not only cost road users money, but potentially their lives.

Here we take a closer look at this worrying trend, how the industry aims to tackle it, and find out if you could be committing insurance fraud without even realising.

What is 'crash for cash'?

Crash for cash is arguably the most worrying product of the prevailing 'compensation culture', as it sees criminals deliberately causing crashes with innocent and unsuspecting motorists simply so they can make fraudulent insurance claims.

The criminals make money by submitting exaggerated claims for personal injury and loss of earnings as well as car hire and damage repair - they may even also throw in the odd bogus passenger to bump up the claim even further.

For instance, one case saw a group of 30 men all claim for whiplash following a staged accident in which they had arranged for a car to drive into their coach. Another, even more elaborate case involved a gang who had staged 180 accidents and subsequently made 230 claims worth a total of £3.2million. Bedfordshire Police cracked this crash for cash ring and 37 people received prison sentences as a result.

There are currently 40 crash for cash gangs under investigation across the UK. The problem is believed to be so widespread that all road users are at risk, wherever they live. The latest figures from the Insurance Fraud Bureau indicate that 1 in 7 personal injury claims are linked to these scams.

What is worrying is that a high number of road users seem to be receptive to getting involved in this kind of criminal activity. A recent MORI poll of almost 2,000 drivers aged 17 and over found that 1 in 12 would consider taking part in a crash for cash claim.

In a bid to make their claims seem more plausible, gangs will also recruit the help of motor engineers, car repair body shops, recovery firms and even doctors and lawyers - so the network of deceit runs far and wide.

The good news is that both the police and the insurance industry are taking the problem seriously. And you can do your bit to curb car insurance fraud by blowing the whistle on any suspected crash for cash criminals by calling the Crimestoppers Cheatline anonymously on 0800 422 0421.

Tackling the insurance fraudsters

The laws on Continuous Insurance Enforcement were introduced last year in a bid to reduce the number of uninsured cars on the road by making it illegal to keep a vehicle without appropriate car insurance unless it is registered as being kept off the road via a statutory off road notification (SORN).

Another recent piece of legislation will see the banning of referral fees in April next year. This involves the selling-on of personal injury details by insurance firms to solicitors and claims management companies.

The fees had been legalised by the Labour government in 2004 and led to the boom in the claims management industry that has seen the cost of personal injury claims double to £14million in 10 years - a rise that is all the more remarkable when you consider that the number of road traffic accidents have actually fallen over that period.

It is believed that these fees were a major factor in the rising number of claims management companies which, in turn, has led to more and more people making claims for minor injuries when they otherwise would not have done so.

The latest weapon in the war on insurance cheats is the Insurance Fraud Register, a central database containing the details of all known insurance fraudsters.

Commissioned by the Association of British Insurers (ABI) and operated by the Insurance Fraud Bureau (IFB), the Insurance Fraud Register stores and distributes the details of anyone found guilty of making a fraudulent claim or who has deliberately lied or withheld relevant information when taking out insurance.

It will enable insurers to search across all types of insurance to detect and prevent fraud during the underwriting process and when processing claims.

For more details on the Insurance Fraud Register, click here.

Could you be unwittingly committing insurance fraud?

Car insurance fraud is not just the preserve of criminal gangs. Indeed, any of us could be guilty of committing insurance fraud without even knowing it.

For instance, if you were found guilty of a motoring offence a number of years ago, you may not declare it to your insurer in the belief that it is now 'spent'. However, you need to remember that, while endorsements for offences such as speeding are kept on your licence for four years from the date of the offence, if you have been:

  • found guilty of an offence that has resulted in your disqualification from driving,
  • found guilty of dangerous driving,
  • disqualified from holding a full licence until a driving test has been passed

then this endorsement will be on your licence for four years from the date of your conviction, which could be several months after the offence took place.

(Note that points for speeding only count towards the 'totting-up' system for three years but remain on your licence for four.)

Furthermore, if you have an endorsement for a drink or drugs conviction, causing death by careless driving while under the influence of drink or drugs, or causing death by careless driving, then failing to provide a specimen for evidence, then this will stay on your licence for 11 years from the date of conviction.

Similarly, not declaring any previous accidents you have been involved in also falls under the umbrella of insurance fraud so be sure to fill in any insurance forms accurately, keeping in mind that insurers may also want details of any accidents you've been involved in that you were not at fault for.

A common type of insurance fraud is the practice of 'fronting', and is usually done by parents who claim to be the main driver on their child's car to get cheaper insurance.

And while there is nothing illegal about putting a named driver on your policy to reduce the price of the premium, it is a criminal offence to falsely claim to be the main driver. 'Fronting', as it is known, can result in your policy being cancelled, a fine and six penalty points, or even a complete driving ban for new drivers.

It is vital that you keep your insurer up to date with any job changes, changes of address or of any changes you make to your vehicle in order to ensure that your policy is valid. If not, then you may be found guilty of driving without insurance which, again, could lead to a fine, six penalty points or a driving ban.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

Have you been a victim of a crash for cash scam? Tell us of your experience here.

Follow Les on Twitter @LesRobertsMSM

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Les Roberts

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