Car Insurance

Fraudsters punish honest drivers

4 September 2010

Increasing car insurance fraud is contributing to the fastest-ever increases in car insurance premiums, AA Insurance confirms.

This follows a report* suggesting that 1 out of every 20 motorists aged under 35 has 'staged' an accident in order to make a fraudulent car insurance claim.

As a result, young drivers are finding their premiums rising much faster than average.

Comment

Simon Douglas, director of AA Insurance, says: "The AA has been tracking the quarterly movement of average car insurance premiums across the industry for 16 years and premiums are now rising at their fastest ever rate. The price of a typical comprehensive car insurance premium, currently about £704, rose by an unprecedented 30.9% over the past year.

"In just three months, premiums rose on average by 11.5% and, for drivers under the age of 30, by 13.4% to £1,128.*

Douglas believes that fraud accounts for a large part of this. "While the organised 'cash for crash' scams that ripped millions of pounds off insurers have made headlines, the problem of car insurance fraud is much deeper and has become one of the principle drivers of insurance premium inflation," he says.

According to some industry commentators, over the past year, for every £100 taken in premiums, insurers have been paying out up to £122 – which, Douglas says, "is simply not sustainable and it's honest drivers who are paying for it.

"The evidence from moneysupermarket.com, suggesting that thousands of people are attempting to try 'cash for cash' themselves – perhaps to get someone else to pay for past damage or to make a claim for non-existent whiplash injury, is deeply worrying. This is extremely rash and puts peoples' lives at risk.

Defrauding insurance companies is not a victimless crime because it affects all honest drivers.

'Black market' law firms

Douglas also believes that dishonest claims are being encouraged by a fast-growing 'black market' of personal injury claim lawyers who are only too ready to promote 'free' cash by claiming for relatively minor, or even non-existent, injury that people would otherwise not have thought to claim for before.

Other common forms of fraud include:

  • 'fronting', where a named driver (often a young person on a parent's policy) is in fact the main driver
  • withholding information such as past claims or convictions
  • telling lies about age, where the car is kept or occupation
  • cancelling direct debit payments to insurers once their documents have been delivered

On top of that, around 1 out of every 20 cars on Britain's roads is being driven without insurance at all.

The AA believes that the growth of price comparison sites has also encouraged fraud, although most people wouldn't see it as such. It is much easier to manipulate information on a computer screen to find the cheapest price – for example, by changing the facts about past driving experience, than attempting to do so in a conversation with insurance sales staff.

Insurers are getting wise to this and are finding that cheap premiums inevitably lead to excessive claims. It's interesting to note that premiums on the price comparison sites are rising fastest of all.

AA Insurance, in common with most insurers, is getting better at identifying fraud and are introducing new technology to help combat this growing menace.

"Those who are caught will find it extremely difficult and expensive to find an insurer willing to take them in future," Douglas warns.

Join the discussion in the AA zone

 

8 September 2010

*According to moneysupermarket.com in a report released Saturday 4th September 2010

** According to the AA British Insurance Premium Index for the second quarter of 2010. The figures quoted are the Shoparound premiums for an annual comprehensive insurance policy, (an average of the cheapest three quotes sourced from over 80 insurers, brokers and schemes based on a basket of 2,800 'customers')