Are cash-for-crash scams driving up motor rates?

Are insurers hiking up premiums in areas of high levels of cash- for-crash claims? Recent data suggests they might be.

The latest Confused.com/EMB motor price index lists the postcodes with the 10 highest increases in comprehensive car insurance in 2010, with Bradford topping the list with an almost 62% increase.

When you compare these rate hike locations against the Insurance Fraud Bureau’s top cash-for-crash hotspots, there is a clear correlation. Seven out of the 10 biggest rate rises also fall into the cash-for-crash top 10. (Click on the infographic above to see in greater detail.)

Wider problem

Cash-for-crash scams typically involve a driver deliberately braking unexpectedly at a junction, causing the vehicle behind to crash into it. Claims are then filed – often for thousands of pounds – for damage to the car and injuries to the driver and passengers.

Insurers say that such claims are a problem, but that rate increases in certain postcodes are based on an array of data, not just simply fraudulent behaviour.

'Staggering' data

The Actuarial Profession’s third-party motor insurance working party chairman David Brown sees a link between premium rises and cash for crash, but believes nothing is definite.

He says: “It is quite staggering, when you look back to the bodily injury working party data, that there are areas of the country where the number of accidents with a bodily injury component is around three times higher than in some other areas of the country. But that is undoubtedly driven by claims management companies."

Join the dots

"To what extent does frauduelent behaviour play a part?" Brown adds. "I’ve got no data to confirm that, but I would not be surprised if there was a correlation.”

Insurers may not admit to such a link, but the evidence shown above seems to suggest a strong possibility that cash-for-crash claims are helping to push up rates to new levels.