What is car insurance fraud – and are you at risk?

, May 11 2016 at 11:30 am

Insurance fraud is a big problem in the UK.

Although measures have been taken to tackle the problem, such as the introduction of Continuous Insurance Enforcement and the Motor Insurance Database, it’s estimated car insurance fraud costs the industry more than £1 billion a year.

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And, ultimately, it’s honest motorists who pick up the bill because fraudulent claims push up the price of annual premiums by about £50.

What is insurance fraud?

Insurance fraud is anything that tries to cheat the insurance process – from giving inaccurate information on a quotation, to making a false claim for whiplash.

On the flip side, an insurer knowingly denying a customer a benefit that is due is also considered insurance fraud.

Car insurance fraud is the most common and most costly type of fraud, and it’s on the increase.

The latest figures from the Association of British Insurers (ABI) show that the 67,000 recorded cases in 2014 represented a 12% year-on-year increase.

The cost of these fraudulent claims was £835 million, a 3% increase on the 2013 figure.

Types of motor insurance fraud

Application fraud – If you fail to disclose or misrepresent information at the application stage (say you leave out the details of an accident or claim, don’t report any points on your licence, or fail to mention any car modifications), this is considered insurance fraud.

It this comes to light when you make a claim, you might find the pay-out is restricted or even that your policy is declared void. That could cost you thousands of pounds if you’re deemed liable for an accident.

Even just making a few ‘tweaks’ at the quotation stage, such as saying your car is kept on a driveway when it’s actually kept on the road, could be enough to invalidate your policy.

 

And it doesn’t matter if your non-disclosure was a genuine mistake, you’ll still have your insurance called into question by the insurer.

Fronting – Adding what’s called a ‘named’ driver is an effective way to cut the cost of cover. But if you declare the named driver to be the main driver in a bid to bring the premium down (because they’re a lower risk driver than you), you’ll be guilty of a type of fraud known as ‘fronting’.

Fabricated or exaggerated claims – This is a type of opportunistic fraud whereby someone who is involved in an accident will submit a claim for personal injury, usually whiplash, even though they have not been hurt in the crash. Alternatively, they might exaggerate their symptoms in the hope of receiving a greater amount in compensation.

Crash-for-cash – This is when a driver deliberately causes an accident in order to generate a claim. This can involve two motorists contriving to crash their cars and splitting the compensation claim between them, or one motorist causing an accident with an unsuspecting motorist. Commercial vehicles are often targeted in crash-for-cash scams.

Phantom passenger claims – This is when an accident has occurred and injury claims are submitted for a number of passengers who weren’t actually present at the scene. This can be as part of a pre-planned crash-for-cash scam or an opportunistic crime at the scene of a genuine accident.

Contrived accidents – This involves making a claim for damage as part of a collision that never actually occurred. A popular way of doing this is to move an already damaged car to an accident black-spot to create the impression an accident has occurred so the insurer foots the repair bill.

Have you ever been caught up in a crash-for-cash scam? Or been accused of insurance fraud after giving your insurer the wrong details by mistake? Let us know…

4 thoughts on “What is car insurance fraud – and are you at risk?

  1. Alison

    My insurance company even went to court, the other party admitted the damage to his car was already there & the magistrate still awarded in his favour. From the minute I entered the court room it was blatantly obvious she looked down her nose at me. All my legal rep could say after the decision was ‘Go home & forget about it, your insurance will sort it out’. This cost my insurance company in excess of £16,000, most of this was court costs & payment for the magistrates time. This was over 10 years ago now & it still makes my blood boil…

    Reply
  2. Sam

    If they claim to know how much they lose to fraudsters then they must know who these fraudsters are, and if they know who these fraudsters are then why do they pay up.
    I think the biggest criminals are the insurance companies themselves. They gang up on us motorists.
    My car was hit in the early hours of the morning whilst I was still in bed fast asleep. It took two long years to clear up my name and even after 6 years I am partially blacklisted. I had legal insurance so that was milked by them.
    I have had a clean driving licence for 40 years and they still put me down for only 2 years. My excess is £700 and instalment payment levies a 29% interest. Banks pay .01% to us on saving!
    This is nothing more than financial mugging on a grand scale. No wonder their profits are sky high.

    Reply
  3. Stuart

    I am still very annoyed that my partner driven my Audi TT late at night on motorway got hit by lorry tyre with steel rim on the middle of motorway damaged front end very badly. Lorry driver failed report to police to shut motorway down because it was so black no light and endanger to other drivers. When this happened lorry driver didn’t reported the incident but we did straight away and police arrived. Lorry driver refuse hand over details or face to face with us so police had to deal with situation. And also confirm it the lorry driver fault not ours. When the claim process and the lorry company not aware of the incident surprising and process taken a lot longer than it should be. Once the insurance agreed to go ahead to repair and carry on processing the incident with 3rd party finally lorry driver admitted it was happened but denied tyre were his !! Once all the process completed they came back to our fault so we loss 4 years no claim bonus. We argue with them its not our fault at all and we do have evident that police officer confirm. They won’t listen they just close the case and given us just 1 year no claim bonus ….Also it although i wasn’t driving but my partner driven at that time they put me down as a driver i should declare the incident not him !!! i asked anyone how can that be and no one able to give me 1 answer for that !!

    Reply

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