Fraud increasing motor rates at record pace

Increasing car insurance fraud is contributing to the fastest-ever rise in car insurance premiums, according to AA Insurance.

This follows a report published today by moneysupermarket.com which suggests that one out of every 20 motorists aged under 35 has ‘staged’ an accident in order to make a fraudulent car insurance claim.

As a result, premiums for young drivers are rising faster than average.

AA Insurance director, Simon Douglas, said: “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% and, for drivers under the age of 30, by 13.4% to £1,128."

Douglas believes that fraud accounts for a large part of this. “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,” he said.

It has been suggested that for every £100 taken in premiums, insurers have been paying out up to £122. Douglas said this is "is simply not sustainable."

"It’s honest drivers who are paying for it. The evidence from moneysupermarket.com, suggesting that thousands of people are attempting to try ‘cash for cash’ 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.”

‘Black market’ law firms

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 added that other common forms of fraud include ‘fronting’, where a named driver (often a young person on a parent’s policy) is actually 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," he said. "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.

“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.

“Those who are caught will find it extremely difficult and expensive to find an insurer willing to take them in future."