What is car insurance fraud?
Car insurance fraud comes in many forms, but it mostly stems from being dishonest with your insurer or faking accidents or injuries to gain financially.
For example, someone might not be truthful about their driving history to get cheaper insurance premiums. Or an opportunist could make a false claim to try and get a payout.
But whatever the motivation, the consequences could be severe, both for the culprit and for other drivers who are impacted by the costly effects of car insurance fraud.
- Car insurance fraud can take many forms, including fronting, faking injuries, and staging accidents
- If you’re not truthful with your insurer you could risk voiding your car insurance and facing criminal proceedings
- It’s possible to commit fraud accidentally by not updating your car insurance details
- The cost of car insurance fraud is passed onto all motorists through higher premiums
Types of car insurance fraud
There are several different ways to commit car insurance fraud, including:
It might be tempting to provide false information in your application to get cheaper car insurance premiums. But if insurers discover you’ve not been honest, your policy could be cancelled and any claim you make is likely to be rejected.
Sometimes you might forget to update important details, like a change of address or where your car is being parked overnight. If your details change, it’s important to tell your insurer, otherwise you could risk invalidating your policy.
This is when someone tries to claim for damage to their car that happened before they took out their policy. Some fraudsters try to buy car insurance immediately after they’ve been involved in an accident so they can make a claim.
This could be anything from hiding a car in a garage around the corner to setting it alight, sinking it into a lake or river, or even just selling it. Once disposed of, the owner pretends the car is stolen and tries to claim the money from their insurer.
A common type of car insurance fraud is exaggerating or pretending to have a neck injury after an accident to get a payout from insurers. But recent reforms are making this more difficult for fraudsters and medical evidence is now needed for all whiplash claims.
Young and inexperienced drivers pay more for car insurance. So if an older person is falsely named as the car’s main driver on the policy, this is known as fronting. It’s usually done to get lower premiums but it’s illegal and could result in a hefty fine or even a criminal record.
If you’re in an accident and decide to make up or over-exaggerate your injuries, or you lie about the damage to your car or belongings to get a larger payout, you’ll be committing insurance fraud.
Sometimes fraudsters will get together and stage an accident, whereby the two drivers are both in on the scam. They may either purposely crash into each other or work together to intentionally cause a crash with an innocent driver.
Some people try to claim injuries for imaginary or phantom passengers, who weren’t in the car at the time of the accident, in the hope of getting a second payout. But there could be serious consequences for anyone that pretends they were in an accident.
Types of car insurance scam
Sometimes scammers try to cheat car insurance providers by involving innocent drivers in their organised fraudulent activity.
Here we explain some of the most common scams:
- Crash-for-cash - This is when fraudsters intentionally cause a crash to make a fraudulent insurance claim.
- Flash-for-cash - A fraudster flashes their lights at another driver to indicate they’re letting them go (against normal give-way rules), then intentionally crashes into them and claims for damages.
- Slam-on fraud - Criminals unexpectedly slam on their brakes in the hope that the car behind will crash into them and they can make a claim.
- Ghost broking - Fraudsters pose as insurance brokers and offer cheap deals, typically to younger drivers. Selling fake or doctored car insurance policies, they take the driver’s money but leave them uninsured.
- Compensation scams - This is a type of cold calling where a scammer calls to say you’re owed compensation after an accident you were involved in. Sometimes they’ll claim to be connected to the Motor Insurance Bureau (MIB).
What are the consequences of car insurance fraud?
If you get caught committing insurance fraud, the consequences can be serious. You could face a fine, penalty points on your licence and even criminal prosecution.
And at the very least, your policy will be voided. Any claim you make will be rejected and you’re likely to find it harder to get insurance in the future.
Unfortunately, the consequences of car insurance fraud affect honest motorists too.
As well as being put at risk on the road if you’re the victim of a staged accident, insurance scams can also leave you out of pocket.
And car insurance fraud can have a wider knock-on effect on motorists in general.
In 2020, the cost of false car insurance claims racked up £602 million according to the Association of British Insurers (ABI) - insurers then pass these costs onto other drivers through higher premiums.
How to avoid committing car insurance fraud
To keep your car insurance legal and avoid committing insurance fraud, you need to be as accurate as possible with the information you provide.
You’ll need to tell your insurer about:
- The main driver (and any other named drivers)
- Any modifications to your car
- Your annual mileage
- Any changes to your address
- Where you park your car
- Any accidents or claims you’ve been involved in previously
- If you have any driving convictions or points on your licence
- If you use the car for work or business reasons
It’s also important to let your insurer know if any of your details change. Otherwise, it could be considered fraud and might mean any potential claim you make is rejected.
How to avoid being a victim of car insurance scams
Buy insurance carefully
Be wary of too-good-to-be-true deals on your car insurance. Only buy policies from reputable insurance providers and check that they’re listed on the Financial Services Register.
Get a dashcam
If you’re involved in an accident, dashcam footage can show what really happened and provide proof of who was at fault.
Keep your details up to date
Whether you’re moving, getting married or making modifications to your car, don’t forget to update your insurer.
Take care on the roads
Keep a safe distance when driving. Beware of tailgaters and look out for cars with broken brake lights that might try to stop unexpectedly in front of you.
If you’ve been in an accident, make sure you take photos and videos of the scene and any damage to the cars involved.
Get details of the accident
Make a note of how many passengers there were in the other car. Take details of the other driver, their number plate and their insurer.
Ignore cold calls
If you get an unsolicited call claiming you’re owed compensation after a car accident, end the call. And if in doubt, double-check with your insurer directly.
How to report car insurance fraud or scams
If you think you’ve been the victim of insurance fraud, there are a few things you need to do.
Firstly, if you’ve been involved in an accident that you believe was intentional, you should contact the police. Take photos and videos, speak to witnesses and note down any details that might be useful for an investigation.
You’ll also need to contact your insurer about the accident and explain why you believe it was caused deliberately.
And if you think you’ve been sold a fake policy by a ghost broker, you can contact the Insurance Fraud Bureau (IFB) by visiting their website or calling their Cheatline on 0800 422 0421.
Frequently Asked Questions
There are a number of ways insurers can detect fraud - they’ll interview the claimant and compare their statement to other documented evidence, including police reports.
They may also do background checks and look at things like social media activity, as well as footage from CCTV and dashcams to verify what’s said to have happened.
And insurers will usually check industry databases, including the Insurance Fraud Bureau, that contain information about the person and their previous driving and insurance history. This helps to highlight any suspicious circumstances or patterns of fraud.
There are various factors that can signal to insurers that a claim needs further investigation. This includes if the person making the claim:
- Seems to have in-depth knowledge of the insurance industry
- Has only recently bought their policy or increased their level of cover
- Is unemployed or there’s evidence that they’re in financial difficulty
- Refuses to provide personal information
- Has an extensive history of making insurance claims
Insurers need to make sure a claim is genuine before they provide any compensation. So they investigate every claim and check the details and evidence carefully.
This way, they can identify whether a claim is legitimate, who’s at fault and whether any compensation is required.
Investigating each claim also makes it harder for fraudsters and means more of them can be identified and prosecuted - ultimately, making the cost of car insurance fairer for everyone.
Your premium is based on the information you provide when you buy your policy. So if you don’t provide accurate information in your application, or if you don’t update your insurer when your circumstances change, your provider can void your cover and reject your claim.
There’s not a blacklist as such, but if you’re found to have committed car insurance fraud it will go on your record. When you apply for car insurance, insurers will look at your insurance history. If there’s anything that makes you a higher risk to insure, they’re likely to refuse to cover you or you’ll be charged much higher premiums.
If you’ve bought your car insurance policy through a broker, it’s important to make sure that it’s legal and valid - otherwise, you could be stopped by the police for driving uninsured.
Firstly, check whether it appears on the Motor Insurance Database - if it’s not listed there, your policy isn’t legitimate.
Even if it’s listed, you should still check directly with the insurer to see whether your personal details match what’s on their records - if they don’t, you may have been sold a fake policy.