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

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, 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

'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.

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