4,000 fraudulent insurance claims 'uncovered each week'

Common lies exposed by insurers

Updated: 

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Motorists' dishonest applications for insurance are backfiring on them, with more than 4,000 fraudulent attempts being uncovered by insurers every week.

Some 212,000 attempted dishonest applications for motor insurance were uncovered in 2014, marking a jump of nearly one fifth (18%) compared with 2013, according to the Association of British Insurers (ABI).

The latest figure equates to just over 4,000 fraudulent applications being found every week.

Common lies exposed include "forgetting" to come clean about previous claims or unspent convictions when asked and giving a false address or a post code for a lower risk area, the ABI said.

In other cases, parents tried to insure a vehicle being mainly driven by their son or daughter in their name to get a cheaper deal. This is commonly known as "fronting".

An index compiled by the AA recently showed that the cost of car insurance policies has recently started to creep up, after a long period of cheaper deals.

The average quote on offer for a driver who shops around for comprehensive cover was £549.46, according to the AA, marking a £27.34 or 5.2% increase over the three months to the end of June.

The cost of insurance is expected to increase further in the coming months. In the recent budget, it was announced that insurance premium tax will be increased from 6% to 9.5% from November - leading insurers to warn that millions of customers will face higher costs for cover.

The AA has estimated that the tax hike will add an extra £18 to the cost of a typical comprehensive car insurance policy.

The ABI is also warning against "ghost broking" scams. These involve illegal insurance advisers selling bogus motor insurance policies, that result in the innocent motorist driving illegally without valid motor insurance, facing prosecution and having their vehicle seized and crushed. Ghost brokers may operate through professional looking websites, and in pubs, clubs, car parks and university campuses.

The ABI said that in one case, an illegal insurance adviser who made £65,000 selling fake car insurance was jailed for two years. Another man, who sold worthless car insurance to Manchester students, was jailed for three years, it said.

The Insurance Fraud Bureau (IFB), which manages cross-industry, large scale ghost broker investigations, is currently dealing with 26 cases of ghost broking fraud.

Mark Allen, the ABI's fraud and financial crime manager, said: "Insurers recognise that innocent mistakes and oversights happen. But anyone lying to get cheaper motor insurance, or tempted by cheap insurance offers without first checking that they are genuine, risks driving illegally.

"The consequences include getting a criminal record and a massive financial headache if found to be at fault for a crash. The risks are just not worth it – especially when you can shop around for the right policy at the lowest price."

He said that various industry initiatives, such as the Insurance Fraud Register, MyLicence that allows insurers to check for any motoring offences, and the work of the Insurance Fraud Bureau and the Insurance Fraud Enforcement Department in tackling ghost brokers are helping to reduce the scope for insurance application fraud.

Here are the ABI's tips to help motorists get the best value legal motor insurance deal:

:: Shop around. Motor insurance is a very competitive market, with insurers, comparison websites, insurance brokers all offering competitive deals that will ensure you get the right policy and the best price.

:: Lower your risk. The following steps can all help cut the cost of cover - have an approved immobiliser fitted, keep the vehicle in a garage or on a driveway overnight and have a telematics-based pay as you drive policy.

:: Opt for a higher voluntary policy excess. The higher the amount of any claim you pay yourself, the lower the premium.

:: Buy your insurance from a reputable source and avoid policies sold on social media networking websites, pubs, clubs and newsagents. You can check if your policy is on the Motor Insurers' Bureau's Motor Insurance Database - www.askmid.com - which holds details of all vehicles insured in the UK, and check on the Financial Services Register - www.fca.org.uk/register - that the insurer or broker is authorised.

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