NU’s motor fraud warning

Norwich Union has called on brokers to be extra vigilant about commercial motor fraud due to the recession and has warned its underwriters about specific threats.

Fraudulent activities and anti-fraud approaches include:

• Use of fake NCD proofs: obtain and scrutinise these documents, contacting the alleged issuer if in doubt.
• Understating number of fleet vehicles: check vehicle numbers on unspecified risks against the Motor Insurance Database.
• Misrepresentation of driver ages and exposure to hazardous goods: look out for any changes in risk information, which make the risk appear more favourable and query any discrepancies.
• Increases in fronting: establish ownership of company vehicles and investigate young drivers. Consider if ‘part-time' employees are a possible front being used to cover children who are in full-time education or work elsewhere.
• Certificate fraud: the customer cancels the policy or defaults on the premium, but continues using vehicles. Request return of certificate before refunding premium where possible
• Suspect theft and fire claims (especially among luxury cars) where customers can no longer fund finance arrangements: investigate suspect claims thoroughly.
• Check drivers' licences (original not copies) regularly as there is a temptation for new and existing drivers to cover up convictions: for example, the driver of the 2007 Heathrow coach crash had been caught speeding five times. Employers who do not check licences could be invalidating their insurance, exposing their business to lack of customer confidence and face prosecution under Corporate Manslaughter legislation.

Mike Smith, commercial motor technical manager at Norwich Union, says: "The pressure of the credit crunch brings out extremes in human behaviour and insurance is one area that's vulnerable to this.

"For example, we had a policyholder with outstanding finance of £30k on a lorry. Due to financial difficulties, the person arranged for the vehicle to be stolen and then tried to claim for the loss. But investigations revealed that the theft was not genuine and the claim refused.

"Instances such as this, along with our experiences in previous recessions, enable us to highlight to brokers and our own underwriting staff some of the scams that a small minority of our policyholders resort to.”