Fighting fraud can help cut the cost of car cover
Rocketing motor insurance premiums are set to rise further as crash-for-cashers hit premiums, as well as vehicles. By Simon Read
Saturday 13 November 2010
fraudsters are the main reason car insurance premiums are set to soar even more, according to insurers. This week, the Transport Select Committee was warned that average increases of 40 per cent in the cost of comprehensive motor insurance in the past 12 months could be repeated, leaving motorists facing years of rising premiums.
Insurers say they have been forced to hike up premiums because of a massive increase in fraud, in particular higher personal injury costs. They also point to the increased costs of dealing with a rise in claims management companies as well as soaring costs to the industry of uninsured drivers.
Is this just the bleatings of an industry trying to justify huge increases to consumers? Or is it the justified complaints of businesses trying to marry the desire to provide competitive cover with the need to be able to make a profit? Clearly insurers want to be able to sell their policies, which means keeping them at a price that people can afford.
But already some drivers are being priced out of the market, particularly youngsters, where premiums for those aged between 17 and 22 have climbed a massive 51 per cent in the past year, according to figures from the AA. Such costs are encouraging more people than ever to risk driving without insurance, one of the key reasons that premiums are rising so fast.
As we've reported before, younger drivers just starting out typically face insurance premiums of £2,000 to £3,000 a year, which can be four or five times more than the value of whatever old banger they can afford to buy. With the fine for being caught driving without a licence currently standing at a maximum £1,000, it's hardly surprising that so many people are tempted to try to get away with it.
"In fact, more commonly, those caught are given a fixed penalty of just £200," points out Will Thomas, head of motor insurance at Confused.com, who gave evidence to the Transport Select Committee on Tuesday. "Where the cost of the penalty remains significantly cheaper than the cost of a policy, the incentive to gamble is much greater," he says.
The solution, according to Thomas, is to introduce higher deterrents for uninsured drivers. "The punishment at the moment does not fit the crime." He also calls for more education and support for young drivers. "Making driving tests harder and more relevant to current driving could decrease claims, allowing the price of policies to fall," Thomas says.
"There should be increased emphasis on the consequences of dangerous driving. With 15 per cent of young drivers causing 31 per cent of all accidents and 40 per cent of all claims, schemes to educate them and provide them with better experience can only be positive and may have the knock-on effect of reducing fatalities and injuries among the young."
Part of the growing problem is that more people seem prepared to lie to insurers, according to research from MoneySupermarket. It claims a third of motorists would cheat their car insurer by making a fraudulent claim to ensure a successful car insurance payout, with younger motorists the most likely to lie. The comparison site polled only 3,013 people so their figures have to be taken with a pinch of salt, but it's clear that fraud is one of the key reasons drivers are facing increased costs.
The rise in fraud by "crash for cash" con artists is a major headache for insurers. The crooks deliberately cause accidents so that they can claim for fictitious car damage and, increasingly, bogus personal injury claims.
"There has been an escalation in our compensation culture, imported from America," says Ian Crowder of the AA. "In the past, if you had a knock or a bump and were left with a sore neck, you would take a paracetamol. Now, personal injury lawyers encourage you to sue."
In fact, a recent case saw a genuine accident involving a 31-seater bus lead to 34 injury claims. Police investigations discovered that one passenger worked for an accident management company and generated £17,000 in referral fees by referring fellow passengers to solicitors. Almost all the claims were found to be for injuries that did not exist.
Insurers say they are trying to take on the crooks. Swiftcover says its investigations have uncovered £2.5m-worth of attempted motor fraud in the past 12 months. "Some of these are minor cases of individuals trying to break the rules, but the real worry is the massive webs of fraud we have uncovered that have probably cost UK insurers and drivers millions of pounds over the past few years," says Robin Reames, Swiftcover's claims director.
Analysis by Direct Line has allowed the insurer to map the country to highlight evidence of suspicious claims and determine danger zones. It highlights Centenary Way, Trafford Park, Manchester as the country's worst hotspot for "crash for cash" fraud. "Every pound taken by a fraudster is a pound taken from honest drivers," says Andy Goldby, director of motor underwriting at Direct Line.
Insurers say that drivers can help to cut the cost of premiums by being more aware of the potential for fraud when there's an accident. "Get as much information as possible, especially the full names, addresses and contact number of the driver, plus contact details for any witnesses," advises Robin Reames.
If you can take photos, do so, he adds. It could help to reveal a dodgy claim, as happened with Sapphira (top right). Also make a note of how many people were in the other vehicle to stop "phantom passengers" sticking in bogus personal injury claims.
If you suspect someone's a fraudster, report them to the Insurance Fraud Bureau's confidential hotline on 0800 328 2550 or online at www.insurancefraudbureau.org/report.
'There was only a scratch and he was fine, yet the driver claimed £40,000'
Driving slowly round a corner into Birmingham New Street station to pick up some friends, 25-year-old Sapphira Gold was shocked when the car in front of her suddenly stopped. She braked but couldn't stop her car slightly nudging the vehicle. "I'm a careful driver and nothing like that had happened before," she says. "But the damage was minimal – in fact, my Golf was totally undamaged – and the driver clearly wasn't hurt." So she got a huge shock a few weeks later when her insurer, Swiftcover, told her the driver was claiming £40,000 for car damage, personal injury and loss of earnings. "I couldn't believe it. He had been fine after my car touched his and had even walked around bending over checking his car. At worst, there were one or two scratches on his car," the singing tutor says. Luckily her waiting friends witnessed the incident and took photos on a mobile phone which revealed the lack of damage. In fact, the shape of the scratches suggests some had actually been caused by another accident. "I didn't for a minute think he had done it deliberately, but his actions since suggest that he did," Sapphira says. "My dad said he thought it was some kind of scam but I had never heard of 'crash for cash'. I couldn't believe that people could be so devious." But with staged accidents earning fraudsters thousands, it's hardly surprising.
Mark Dampier: 'We're on our own in retirement. They've pulled pensions to pieces'
Donald MacInnes: 'I have to have £500 a month spare from now until at least 2035'
HSBC becomes first bank to offer five-year fixed rate mortgage with interest rate under 2%
Crippling PFI deals leave Britain £222bn in debt
Pension freedoms: How to deal with cold calls from scammers
- 1 Alan Rickman admits editing 'terrible' script with friends in Pizza Hut behind backs of writers on Robin Hood: Prince of Thieves
- 2 Rarest Beanie Baby of them all could be sold for £62,500 on eBay
- 3 Professional big game hunter Ian Gibson crushed to death by elephant during hunt
- 4 Farmer told to tear down mock-Tudor castle after hiding construction behind hay bales
- 5 Rebecca Francis accuses Ricky Gervais of using 'influence' to target female hunters after receiving barrage of death threats
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...
Day In a Page
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000