RAC Cars News


Insurers Receive 4,000 Fraudulent Applications Every Week

By raccars Published

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The Association of British Insurers (ABI) claims that it discovered 212,000 dishonest or fraudulent motor insurance applications in 2014 alone, up 18% on the previous year. The most common reasons for a claim to be declared fraudulent were a failure to disclose previous claims and convictions and using a false address.

Fronting has also become one of the main reasons for motor insurance applications to be declared fraudulent. This is when cars are insured with a parent as the main driver and their child as a named driver, when in fact the child is the main driver of the vehicle. Fronting is a well-known way to achieve a lower premium for younger drivers.

After a few years of insurance prices reflecting a downward trend, this year the average premium has increased. The average price for a comprehensive motor insurance policy in June was £549.46, up by 5.2% or £27.34 since April. It is expected that prices will continue to rise, in no small part thanks to the increase in insurance premium tax announced by Chancellor George Osborne in his summer budget. From November every policy will be subject to insurance premium tax of 9.5%, up from 6%. Insurers claim they cannot afford to absorb the extra cost, which will be passed on to motorists in the form of higher premiums. Industry analysts estimate that the average comprehensive motor insurance policy will increase by £18 to cover the tax hike.

Another concern for insurers, according to the ABI, is a scam called 'ghost broking'. This sees motorists being sold non-existent policies by bogus insurance advisers, meaning the unwitting motorist is driving illegally and is at risk of prosecution, which could see their vehicle impounded and crushed. Ghost brokers create websites that look genuine and motorists have no idea that the policy they are buying is not real. There are currently 26 incidences of ghost broking under investigation by the Insurance Fraud Bureau (IFB).

While insurers accept that some applications contain genuine mistakes with no attempt to defraud, the ABI advises motorists not to risk driving illegally by answering any questions on an insurance application dishonestly and to consider cheap insurance policies thoroughly and make sure they are genuine before accepting them.

Insurers can easily and quickly check for cases of fraud using the MyLicence scheme, which holds driver records, and the Insurance Fraud Register; therefore, anyone trying to mislead on an application is more likely than ever to get caught.

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