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Insurance Fraud: What it Costs the Car Insurance Industry and Why it’s Never Ok

Sep 18, 2019

Committed both by individuals and also by larger criminal gangs, fraud is an issue which has hounded the car insurance market for years.

As a driver it is important to be aware of the types of car insurance fraud. Not only to ensure that you do not fall victim to the organised crime that plagues the industry, but also to ensure that you do not unintentionally commit insurance fraud yourself.

What are the common types of car insurance fraud which are committed?

There are many types of car insurance fraud committed, all the time. Some of the more common types include:

1. Not declaring information to your insurer – not declaring information to an insurer when asked is considered fraud. The information you supply is used to calculate your premium. Not declaring or providing false information can significantly affect this. This can happen at two points during the insurance process:

At the point of taking out an insurance policy –  For example, not disclosing details of penalty points that you may have on your licence. Drivers can face further penalty points and sometimes prosecution for not disclosing penalty points to an insurer. This can also potentially invalidate your insurance. Likewise, falsifying information such as your vehicle usage, where the vehicle is kept overnight etc is considered fraudulent.

During the course of your insurance policy – if your circumstances change during the course of your policy you must inform your insurer. This can include information such as your address, where your car is parked, the usage of your vehicle. Likewise, you must inform your insurer of any modifications made to your vehicle.

2. Fronting – another type of fraud, fronting involves adding a driver to your insurance policy as a named driver when in fact they are going to be the main driver of the vehicle. Common occurrences of this are amongst parents adding their child to their insurance policy. Whilst it may make an insurance policy cheaper, it is illegal.

3. Staged accident – two (or more) parties may agree to purposefully crash into each other. They will then make significant claims for vehicle damage, personal injury etc for financial gain.

4. Exaggerated claims – such as claims for injuries to individuals who weren’t even present in the vehicle when the accident happened.

5. Cash for Crash – this type of fraud tends to involve bigger criminal gangs. Crash for cash involves the staging of an accident. When a vehicle hits another from behind, the vehicle travelling behind is usually thought to be at fault. Therefore, criminals can play on this factor and use it to stage an accident. For example, suddenly braking for no reason so that the unsuspecting vehicle behind crashes into the back of them. Insurance claims, which are typically exaggerated are then made for vehicle damage, personal injury and other costs.

6. Ghost broking – anther type of insurance fraud which involves people selling fraudulent car insurance policies. Ghost brokers often pose as genuine car insurance brokers. They may for example, forge insurance documents, fake your details to bring the price of a policy down or take out a genuine policy but cancel it straight away to claim a refund and your money. If you fall victim to a ghost broker, the insurance policy you think you have is likely to be invalid. Meaning you could be liable for any costs if you do need to make a claim.

Read this useful information on how to spot and avoid ghost brokers.

How much does car insurance fraud cost the car insurance industry?

Car insurance fraud is a major issue in the car insurance industry. Recent figures released by the ABI found that 55,000 fraudulent motor insurance claims were made in 2018. These claims were worth a total of £629million.

Insurance fraud is thought to cost the insurance industry as a whole over £1billion a year.

The insurance industry continues to tackle the issue, spending around £250million a year on ways to detect and prevent fraud.

What impact does car insurance fraud have on car insurance premiums?

Given the figures listed above it is clear that car insurance fraud is unfortunately going to have an inevitable impact on car insurance premiums. Figures vary but it is thought that the impact of car insurance fraud could be adding as much as £50 to each car insurance policy sold.

Why is committing car insurance fraud never ok?

Car insurance fraud unfortunately impacts honest drivers the most. Affecting their car insurance premiums.

It also won’t go unnoticed. Insurance fraud can be punishable by criminal prosecution and prison sentences. If you misrepresent information on your insurance application form, your insurance may be invalid when you come to make a claim, or the amount of pay out could be restricted. Likewise, you could find it harder to obtain insurance in the future or find you must pay more for a policy.

There are many misconceptions about insurance fraud with many people thinking it is ok and that no one is going to investigate. Yet this couldn’t be further from the truth. Insurance fraud is something that the insurance industry is very much focussed on. This article from the ABI looks to bust some of the common myths about car insurance fraud and is well worth a read.

At Anthony Jones we work hard to get our customers the best value cover that adequately meet your needs and accurately reflect your circumstances. We are also authorised and regulated by the FCA so you can be sure that you are in safe hands. If you are looking to review your car insurance you can complete our online car insurance quote form or call us today on 020 8290 7776.

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