The credit front

The credit crunch may result in a rise in the type of insurance fraud known as ‘fronting' as cash-strapped parents attempt to reduce the high cost of their driving-age children's car insurance, according to esure car insurance. This month the company launches a new internal drive to detect and tackle the problem.

Fronting is the practice of a parent insuring a car that is primarily - or solely used - by a son or daughter in order to obtain a cheaper premium. Often, the parent uses their address knowing that the son or daughter is actually using the car in a different location such as college or university. With a fronted policy, the mature, experienced driver persuades the insurer that they are the main driver of the car and that it is based at their home to take advantage of their lower apparent risk factors, when in fact neither is true.

To reduce its exposure to fronting, esure has trained staff to be on higher alert for tell-tale signals, at either the point of sale or claim stage, that the practice is taking place.

Instances where fronting may be suspected, include:

A young driver trying to arrange car insurance, in a parent's name, where they are a named driver.

A parent paying for car insurance (with them as a main driver) but using a debit or credit card bearing their son or daughter's name.

A son or daughter giving their own mobile phone or email address as the contact details for a parent's policy.

A car being insured by a mature driver with a personalised numberplate that indicates it may be the named driver who has chosen the plate.

A second, ‘starter' car (perhaps an older, lower-value vehicle with a small engine size) being insured by parents in their own name with a child as a named driver, when they already have an established higher value or high-performance car insured.

A parent switching their no claim discount onto a second car with a child as a named driver - so the child gets the benefit of the discount despite having no 'earned' discount themselves.

A theft claim whereby the vehicle was reported stolen from a different residential address to the home address of the policyholder - indicating that a son or daughter may live away from home at university and be the main driver of the vehicle.

Mike Pickard, Head of Risk and Underwriting at esure car insurance, said: "Fronting is fraud despite many people thinking it is a legitimate way of massaging premiums down with a few white lies. The simple rule is that if you're deliberately trying to give your insurer the impression of a very safe set of circumstances when you know that the truth is different, you are probably fronting.

"Cases where parents are effectively trying to transfer their own no claim discount to an inexperienced drive on a car they simply don't drive are fronting - plain and simple. With household purse strings tightening, parents may be tempted to do this to slash the cost of their son or daughter's car insurance but, if detected, insurers could treat the policy as invalid. Honesty is the best policy when it comes to car insurance."

esure advises that the best way for young drivers to start earning their own no claims discount is to insure a low value, low power vehicle in their own name for a few years. The premium may be fairly high to start with, but the years of claim-free driving build-up quickly and premiums drop substantially even after a single year of claim free driving is racked up.