RAC Car Insurance Fraud: What You Need To Know

Would you know if you were committing car insurance fraud?

Withholding information from your insurer could result in serious repercussions. If you don’t disclose details of penalty points or other issues, whether it was intentional or not, you could invalidate your cover.

But the results could be more severe: fines, further penalty points or even, in the worst cases, prosecution. 

Car insurance fraud is a serious and escalating issue. In 2017, research from RAC Insurance revealed some worrying statistics about drivers who had failed to tell their insurer about penalty points they had picked up as the result of driving offences.

The research revealed:

  • 23% of drivers failed to tell their insurer the last time they picked up points on their licence
  • 18% of drivers surveyed admitted that they wouldn’t tell their insurer if they did pick up penalty points
  • 1 in 10 drivers surveyed said they knew someone who had picked up penalty points but got a partner to take them instead. This is an offence considered so serious that it can result in a prison term.

The number of drivers potentially withholding information about penalty points was estimated at around 650,000.

RAC Insurance Director, Mark Godfrey, commented on the results of the survey.

"Not declaring penalty points is a serious matter as it puts drivers at risk of holding invalid insurance as well as potentially incurring substantial penalties from the police or even a prosecution.

“The onus is always on the person taking out an insurance policy to make any incident known that could influence an underwriter in calculating a premium.”   

Failing to disclose penalty points is one way drivers can potentially invalidate their car insurance policy, but there are other ways of running that risk. Some of them may seem minor and some of them are simple mistakes, but drivers should be aware that they can invalidate their car insurance and may not even be aware that they have done so.

Some of those mistakes include:

Fronting

Fronting is now a well-known term in the car insurance industry. Simply, it's when someone is added to an existing insurance policy as a named (or “secondary”) driver but is actually the main driver. 

A common occurrence of this is a parent adding their son or daughter to their own insurance policy. This brings the cost of the insurance for a younger driver down considerably, but it is illegal. 

Change of circumstances 

Insurance premiums are calculated on a number of factors, and the price is influenced by those factors. So, if any of those change – such as your home address, where the car is regularly parked overnight, occupation, the intended use of the vehicle - you should inform your insurer.  

Declaring modifications

If you make any modifications to your car, however minor, you should inform your insurer. Fitting a security alarm might bring insurance costs down, but most cosmetic modifications will usually result in an increase, especially if it improves the performance or increases the value of the car.

Vehicle dumping

Vehicle dumping is when an owner abandons their car, sets fire to it or does something similar to dispose of it, and then claims it has been stolen to recover money via insurance.

These are all examples of insurance fraud that a driver can be held responsible for. However, there’s another type of car insurance fraud; methods used by criminals or criminal gangs to target other motorists.


Becoming a victim of car insurance fraud

Two of the most prominent and commons methods of organised car insurance fraud are ghost brokers and crash scams.

Ghost Brokers

Ghost brokers are criminals who pose as insurance brokers and sell fake policies to unsuspecting motorists. Some policies might be genuine versions bought from official companies but then modified and falsified, before being passed on to motorists who have no idea that they are buying a policy that is essentially worthless.

Another tactic is to take out a genuine insurance policy but then cancel it quickly afterwards and then claim the refund back, as well as the victim’s money.

On other occasions, the insurance documents might be completely fake from the beginning. These are made to look legitimate, but are anything but.

The City of London Police has warned that if someone buys from a fraudster instead of a genuine car insurer or broker, the risks include points on their driving licence, a fixed penalty notice, being liable for costs if they're involved in an accident, and even having their vehicle seized and potentially destroyed.

The #SteerClearOfFraud campaign was launched by Metropolitan Police in February 2018 to alert motorists about the risks of car insurance fraudsters and advise on spotting potential ghost brokers. The demographic most likely to be targeted by fraudulent insurers are men aged between 20-29.

Be aware that ghost brokers may make contact via social media, using the likes of Facebook, Snapchat, Instagram, and WhatsApp. They might make an approach in a bar or a pub, or place adverts on forums and student websites.

If something seems doubtful - the price of the policy is surprisingly low, or the method of advertising feels suspicious or unofficial - then trust your instincts and avoid engaging further.

There’s a full list of approved insurance brokers on the website of the British Insurance Brokers’ Association and, if you’re in any doubt as to whether your vehicle is properly insured, consult the Motor Insurance Database website. Drivers can enter their vehicle registration number for a free check.

Crash scams – flash for cash and crash for cash 

Crash scams are another form of common car insurance fraud. This is a method criminals use to extract money via an insurance claim, by deliberately staging an accident.

There are two common tactics, often known as crash for cash and flash for cash. One is when a car in front of you suddenly slams on its brakes, giving you no time to react, so you crash into the rear of the vehicle. 

In a similar way, a car might flash its lights at a junction - signalling its intention to let you out first - before then colliding or crashing into you. This is often known as ‘flash for cash’.

The driver involved will inevitably claim the accident was your fault and will exchange insurance details. When you receive their claim it will often have extra costs involved - citing a whiplash injury, car hire or vehicle recovery costs, for example.

The Insurance Fraud Bureau has identified three distinct methods of so-called ‘crash for cash’ scams:

The staged accident - involving two vehicles, both driven by criminals, and crashed away from witnesses.

The induced accident - when criminals brake suddenly or deliberately create a crash involving unsuspecting motorists.

The ghost accident - when there’s actually no accident at all, but instead a fake insurance claim is submitted.

Crash for Cash scams cost £340m a year, according to Insurance Fraud Bureau


What to do if you're a victim of a crash scam

If you think you have been involved in a crash scam, follow these tips:

Write down or note as much information as you can, including details of the accident, the driver, the other vehicle.

Take photographs of both cars and the damage sustained, if you can.

Don’t admit any blame or liability.

If there are any witnesses, ask if you can speak to them or contact them later. Be careful, though, that fraudsters working in gangs have been known to place witnesses at accident scenes.

Call the police and alert them to the accident. This might be enough to deter the fraudsters.

Contact your insurers to tell them about the accident.

Contact the Insurance Fraud Bureau’s Cheatline on 0800 422 0421 to report the incident.

Car insurance fraud is a serious offence. If you’re in any doubt at all about how changes to your circumstances might affect your insurance policy, contact your insurer.