Insurance fraud is increasing motor premiums
Fraud is pushing up insurance premiums
Fraud is pushing car insurance premiums up faster than ever, according to AA Insurance.
In September 2010 the AA made a lot of media noise about fraud and its effect on insurance premiums. This noise is being made at the same time increases in motor premiums are seen.
This media campaign relied on a report published 4 September, 2010 by Moneysupermarket.com, which suggests a fifth of young drivers have ‘staged’ an accident.
We have not yet gained access to this report. It was prepared by Opinium Research which spoke to just over 2,000 people. We do not know what they asked or in what circumstances, but it looks like a very thin basis to suggest fraud is so high.
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 per cent and, for drivers under the age of 30, by 13.4 per cent to £1,128.
“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.”
According to some industry commentators, over the past year, for every £100 taken in premiums, insurers have been paying out up to £122 – which, Mr Douglas said “is simply not sustainable and it’s honest drivers who are paying for it”.
He continued: “The evidence from Moneysupermarket.com, suggesting that thousands of people are attempting to try ‘cash for crash’ 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.” Mr 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”.
He adds that 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; and even 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.
“I have little doubt 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,” Mr Douglas said.
“But 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.”