Insurance fraud costs car insurance companies millions of pounds every year, and adds more and more costs onto the premiums of all drivers.
Here we look at some of the most common forms of car insurance fraud and outline what you need to look out for to avoid becoming a victim.
‘Cash for crash’ fraud
So-called ‘cash for crash’ accidents are when fraudsters cause an innocent driver to have a crash with them and be held liable.
The most common form of this type of fraud is engineering a situation that causes the innocent driver to hit them in the rear, as this type of accident is almost always deemed as their fault. This is due to rule 126 of the Highway Code which states that drivers should always ‘leave enough space between you and the vehicle in front’.
Fraudsters will therefore attempt to put you in a situation that forces you to crash into the back of them e.g. braking suddenly for no reason, pulling out in front of you and immediately slamming on the brakes etc.
The aim is to then claim compensation from your insurance policy for injury, loss of earnings, hire vehicle costs and so on – for them and their passengers (who often were not even in the vehicle at the time of the accident).
Statistics from the Insurance Fraud Bureau (IFB) suggest that cash for crash fraud costs insurance companies about £340 million per year.
If you are the victim of this type of fraud you may have to pay your policy excess, lose you no-claims bonus and pay higher premiums – so it is not exactly a ‘victimless crime’.
How to avoid being the victim of ‘cash for crash’ fraud
The most common vehicles targeted by these scammers are commercial vehicles, as the fraudsters believe companies will be less likely to dispute the claim than individuals would. On a similar level, scammers will also seek out victims they deem to be unlikely to strongly challenge the case e.g. older drivers and mothers with children in the car.
However, all motorists are at risk of falling victim to cash for crash scammers and all need to be aware of it. The Insurance Fraud Enforcement Department (IFED) has published the following list of tips to help you avoid a staged cash for crash car accident:
- Keep a safe distance when driving, reducing your risk of running into the back of the car in front.
- Beware of tailgaters: fraudsters sometimes tailgate a driver to distract them. The car in front of the driver, driven by a co-conspirator, will suddenly brake, forcing the driver to collide.
- Look out for cars with broken brake lights: it can be a sign of someone looking to stage an accident, as other drivers won’t be aware if they suddenly brake.
- Take care at roundabouts and in congestion: the confusion and stop-start nature are often prime locations for forced accidents.
- Keep your distance from cars that might rapidly pull out of junctions and then brake in front of you.
- Have extra vigilance if you drive a larger commercial vehicle – these are targeted more often.
- On dual carriageways and motorways, beware of cars that might suddenly swerve in from a faster lane and force you to drive off-course into another vehicle.
Ghost brokers – also known as ‘illegal intermediaries’ – are scammers who sell fraudulent insurance policies to unsuspecting customers, most commonly car insurance.
The IFED has recently warned that this form of fraud is on the rise, with over 850 cases reported between November 2014 and October 2017. These cases cost the victims an average of £769 each.
This type of fraud typically involves salesmen offering cheap deals – usually to young people who have to pay the highest amounts for car insurance. The victim will pay for their cover and receive what looks to be genuine insurance documents, leading them to think they have legitimate cover in place. It’s only when they have an accident and need to make a claim that they realise they have been duped – and are suddenly liable for the full amount of the claim.
Some may also be stopped by the police, and the penalties for driving without insurance can be severe, including a fine and six points on your license and having your vehicle seized.
How to spot a ghost broker
The IFED has warned that many ghost brokers use social media to attract their victims, buying adverts on Facebook and Instagram as well as in money-saving forums and even University notice boards and marketplace websites.
They have also been known to place ads in bars, pubs, newsagents and motor repair garages.
The general advice is to first of all be wary of any car insurance deal that looks too good to be true, especially one that provides a mobile phone number or a generic email address from Hotmail, Gmail, Yahoo, Outlook etc.
The term ‘fronting’ refers to someone who falsely claims to be the main driver on a car insurance policy in order to save money on the premiums.
This is a very common form of car insurance fraud, and is often carried out by people unaware that they are committing a crime. For instance, parents will buy the policy and add their children as a named driver despite the child being the main driver. Young drivers are seen as a higher risk of making a claim, and therefore have to pay higher premiums as a result. Some parents may think that by doing this they are just helping keep the costs down, but many are unaware at just how serious fronting is.
If a driver is found to be fronting after being involved in a car accident or making a car insurance claim, they may have all or part of the insurance claim refused. In addition, their policy could be cancelled and they could face prosecution for fraud, which can lead to a criminal record.