Covering your kids' car under your own name can lead to big trouble, says Lisa Bachelor
Jeremy Clarkson, Richard Hammond and James May have landed themselves in hot water for promoting it on Top Gear. Now it seems more people than ever are doing it.
The number of cases of the fraudulent practice of "fronting", when a parent insures a child's car in their own name but adds their child, the real main driver, to the policy in an attempt to keep costs down, has shot up in the past two years.
A report to be released by the Association of British Insurers on Thursday is expected to show that this and other forms of insurance fraud have increased by 30% since 2007. The report will show that the cost of undetected fraudulent general insurance claims now costs the industry an estimated £1.9bn a year, compared with £1.6bn two years ago.
The crackdown by insurers on cheats during the process of making a claim has led to more fraud at the "front end", when insurance policies are taken out, says the ABI - though insurers are cracking down on this now, too.
"Through closer scrutiny of proposal forms and claims, as well as the exchange of information through industry-wide databases, the net is tightening on the cheats," said Nick Starling, the ABI's director of general insurance and health. "Anyone who sees insurance as a soft touch can end up with a criminal record, credit problems and costlier and harder-to-obtain insurance."
During a recent Top Gear episode, presenters competed to see who could get the best car and the cheapest insurance premium for a 17-year-old male driver. "It soon dawned on us that the only realistic way of getting covered when you are 17 is by going on your parents' insurance," May said. "So we got back on the phones pretending to be dad."
While fronting is classed as insurance fraud, many parents carry it out without ever realising it is a criminal offence.
Some insurers have changed their underwriting criteria to prevent this by charging for the highest-risk driver - even when this isn't the main driver, says Hayley Parsons, chief executive of Gocompare.com.
"Fronting is a common fraud and we would urge parents to avoid the practice as, if found out, the consequences could be severe," she says.
May's co-presenter Hammond was quick to add a caveat during the Top Gear episode: "Can I just point out before we do move on; if you do decide to put yourself on your parent's insurance and you have a crash, and the insurance company find out that it wasn't really your car ... they won't pay out, then they can prosecute you and you might go to jail."
In reality, if fronting is detected, insurers can refuse to pay out for any claims or can settle a third-party claim and recover the cost from the parent as the policyholder. If the insurer declines a claim, the young driver could be treated as uninsured and could be fined hundreds of pounds and receive six penalty points (an automatic ban for new drivers). They will also face higher insurance costs in the future.
The ABI report will also show an increase in "walk away" claims. These involve an insurer, suspicious of possible fraud, asking the claimant for more details of a claim, only for the claimant not to pursue the claim. Though the ABI says this is not confirmation of fraud, it is a likely indicator of such behaviour.
There has also been a 35% rise in claims for high-value home and leisure items such as LCD TVs, laptops and high-end watches. Again, the ABI suspects many of these to be fraudulent.
Lisa Bachelor
The Observer
