Parents unintentionally committing insurance fraud

Thousands of British parents and even grandparents are unwittingly committing insurance fraud as their kids drive off to university in a car primarily insured for mum and dad, or grandma and granddad, with teenage children paying the penalty.

New research from Zurich Insurance reveals that one in 10 people surveyed (nine per cent) who’ve helped their child or grandchild buy a car currently has it insured in their own name – with many not realising that they could be breaking the law in doing so.

A staggering 68 per cent of those who have insured the car in their own name admitted they did it primarily to help reduce premiums – as experienced drivers tend to pay lower insurance premiums than their young relatives, while a fifth (19 per cent) mistakenly believe the car should be insured in their name because they legally own it.

Known as “fronting”, the practice involves one person insuring a car in their name and adding someone else as a “named driver” to the policy – when the named driver is in fact the main or only driver, rather than an occasional driver.

According to the research, 57 per cent of those who have helped their child or grandchild buy a car don’t realise that fronting constitutes insurance fraud, with more than a third (37 per cent) actively believing the practice not to be insurance fraud.

Many parents appear to be underestimating the consequences of fronting, which can leave the driver uninsured if the insurer establishes that the named driver is, in fact, the main or only driver. Although 46 per cent do think that the person on the insurance policy could be fined, just 24 per cent realise that it would be their child or grandchild who would pay as the uninsured driver.

Likewise, 30 per cent believe that it is the policyholder who could stand to receive penalty points, while just 22 per cent realise it would actually be the driver.

While many may think that their insurer will never find out about fronting, if a driver is involved in an accident it could be too late and the consequences can be severe. The consequences range from policies being cancelled and claims refused, to drivers being taken through the court system; receiving a fine, penalty points on their licence, or ultimately, being disqualified from driving.

Scott Clayton, Claims Fraud and Investigations Manager at Zurich Insurance said, “It’s natural that parents and grandparents want to give their kids and grandchildren a helping hand when buying and insuring a car, but fronting won’t help them in the long run. Although many don’t realise that what they’re doing is illegal, they also don’t realise that it’s a false economy with serious consequences, should the driver have an accident.

“An insurer would be within their rights to decline a claim or recover any third party costs from the child or parent and grandparents themselves. If declining a claim, the police could treat the driver as driving uninsured and so be fined hundreds of pounds and receive six penalty points on their licence, which would mean an automatic ban for a newly-qualified driver. They will also have to declare that a claim has been declined on future insurance applications, raising their premiums in future.

“We urge parents or grandparents to check that the insurance details for vehicles driven off to university are up to date, and the details of the main driver are accurate to avoid any future problems. A simple phone call to your insurer will make sure that the vehicle is in the right name and that in the event of an accident the young driver is covered.”