5 Scams That Increase Our Premiums
The overall cost of car insurance is influenced by many factors, but levels of insurance fraud is one of the biggest by far. In 2014, 130,000 fraudulent claims cost insurers around £1.3 billion, adding an extra £50 to motorists’ annual car insurance premium.
How do fraudsters get away with it? Here are 5 of the top insurance scams – some of them rely on innocent, law-abiding motorists like you, so be aware and don’t get taken for a ride if you’re involved in an accident in suspicious circumstances.
1. Crash for cash
The scenario for this is quite simple – the scam car drives ahead of you and deliberately slams on their brakes, causing you to crash into the back of them. The damage to their car is often very minor, but the resulting claim to your insurance company may be for many thousands of pounds and could include dummy claims for:
- repair costs
- replacement car hire
- towing fees
- injury claims (sometimes for non-existent passengers!)
- loss of income
2. Flash for cash
This is a similar ploy to “crash for cash”. In a malevolent twist to the common etiquette of courtesy among drivers, the scam car will flash their lights to a car waiting to emerge from a junction, then deliberately run into them and claim to the victim’s insurers that they pulled out of the junction without warning. They’ll deny flashing their lights, but if pushed by a witness, they’ll fall back on the argument that they flashed their lights to warn the other motorist they were there, not as encouragement to pull out of the junction.
As before, their fraudulent claim will be vastly inflated and might consist of costs for all sorts of non-existent expenses.
3. Hit and run write-offs
In this insurance fraud, the driver chooses an area with no surveillance cameras and deliberately writes off their own car. The subsequent claim to their insurer insists that they were the victim of a hit-and-run driver who can’t be traced. This one often succeeds because it’s difficult for the insurer to prove the fraud.
4. Dummy thefts
A variant of the previous fraud is for a driver to stage a theft of their own vehicle. They’ll file a police report and then submit a claim to their insurers for the cost of the car when it’s eventually found. The fraud sometimes involves setting fire to the car or otherwise making sure it’s a write-off to maximise the value of their insurance claim.
By far the biggest insurance scam in recent years are claims for whiplash injuries. The total cost of whiplash claims to the insurance industry, according to the Association of British Insurers, is more than £2 billion. Many of the 1,500 claims submitted each day are either exaggerated or completely fraudulent.
The insurance industry and the government have been working hard to eliminate fraudulent whiplash claims. In his 2015 Autumn Statement, the Chancellor, George Osborne, announced plans to end the right to cash compensation for minor whiplash injuries. The estimated saving to insurers will be in the region of £1 billion. These savings are expected to be passed to motorists, reducing annual premiums by an average of £50.
Don’t be a victim of an insurance scam
- Keep a safe distance from the car in front in case their brakes are applied suddenly.
- If you’re “flashed” to pull out of a junction, do so carefully
- If you’re involved in an accident, take photos or video footage of the extent of the damage to the other car. This could be used to argue against an inflated insurance claim later on.
- Make a note of how many passengers are in any other vehicles involved in the accident in case a fraudulent whiplash or injury claim is made.
- The police should be called if anyone claims to be injured.
- If the other driver seems to have his insurance details already written down and ready to hand to you after an accident, be suspicious. That kind of preparation could indicate they intended the accident to take place all along.