Drivers who allow “phantom” passengers to make fraudulent insurance claims related to actual accidents involving their vehicles can now have their own legitimate claims rejected due to their “fundamental dishonesty”.
In a recent court case, the judge in the case ruled that the claimant, Mr Feim Ismaili, was fundamentally dishonest in supporting the claims of two phantom passengers and should not, as a result, receive compensation for damage caused to his car in the accident.
The ruling was based on Section 57 of the Criminal Justice and Courts Act 2015, which is designed to crack down on insurance fraud.
It contradicts a 2009 decision by the Court of Appeal that suggested claimants who supported fraudulent passenger claims should still have their legitimate claims paid out.
Not surprisingly, this latest ruling is being hailed as an important victory by the insurance industry.
John Beadle at insurer RSA said: “This is a great outcome and it is good to see the court applying Section 57 in this way to dismiss all claims, including the vehicle damage part of the claim.
“Hopefully, these types of attempts to commit fraud will start to dwindle when people realise how their dishonesty in supporting others can defeat their own claim.”
£1.3 billion problem
Dishonest motor claims remain the most common type of insurance fraud, according to the Association of British Insurers (ABI).
Its latest figures show that insurers uncovered 2,500 frauds worth £25 million every week last year.
And while the total value of dodgy motor claims was down 10% on 2014, it still accounted for £800 million of the £1.3 billion total.
James Dalton of the ABI said: “Insurance cheats do not lack nerve or ingenuity, which is why there will be no let-up in the industry’s commitment to protect honest customers.
“The scale of frauds uncovered shows that the industry’s £200 million a year investment in tackling fraud is paying dividends, as is the collaboration with the Insurance Fraud Bureau and the Insurance Fraud Enforcement Department.”
Motor insurance is not the only type of cover popular with fraudsters, of course.
So-called “slip and trip” liability claims are also very common, and growing in frequency.
The number of fraudulent claims of this kind detected by insurers hit 26,900 in 2015, up 36% on the previous year.
“Reducing fraud is part of a bigger picture of reducing unnecessary costs, so that honest customers benefit from the most competitive insurance deals,” Dalton said.
“This is why it is important to ensure that the Government implements further proposals aimed at tackling rising personal injury claims.”
More property frauds were also uncovered. The number of property frauds detected last year rose by 7% to 27,500.
Government proposals designed to reduce the number and cost of fraudulent motor insurance claims, particularly those centred on hard-to-detect whiplash injuries, have been criticized by Lee Jones, managing director of Free Motor Legal, a provider of legal protection services.
He says making it harder for people who are genuinely injured to make claims – for example, by increasing the value of claims on which costs can be recovered from £1,000 to £5,000 – is unfair.
“Any fraud is unacceptable, and those caught and convicted face prison, and deservedly so,” he said.
“There is a criminal justice system there to deal with both insurance fraudsters and innocent motorists, and those injured on the roads should not expect to have their rights to claim removed due to the actions of a small and stupid minority.”