Honesty is the best insurance policy

As the credit crunch wrangles on, insurers are seeing evidence of increasing underwriting fraud, costing honest motor insurance customers between £50 and £60 each per policy.

In a desperate attempt to slash the price of motor insurance premiums, people are declaring false information perhaps unaware that their insurance may be invalid as a consequence.

Simon Warsop, director of motor pricing at Norwich Union, said, "As the largest insurer in the UK we're at the forefront of the fight against fraud for the benefit of our honest customers. We have systems in place to identify policies that are bought using fabricated data, so when declaring information for an insurance quote it's essential that customers have supplied accurate information to ensure they have adequate cover in the event that they need to make a claim."

"Fortunately, the majority of our customers are entirely honest and provide accurate, fully disclosed information when they call or go online for a quote. However, there are dishonest people that risk invalidating their insurance by giving incorrect information in a bid to get cheaper motor insurance."

Examples of the main types of underwriting fraud:

Incorrect No Claims Discount (NCD)

In a bid to get a cheaper quote people are claiming more years of no claims than they have actually accrued, either through misunderstanding or deceit. NCD relates to the policy holder and the vehicle, not to anyone who happens to be named on an insurance policy, so unless the insurance policy is in your name you are not able to claim for your NCD. If you have more than one vehicle then you need to build up NCD on each vehicle. Insurers including Norwich Union will consider offering an

introductory NCD to named drivers with clean records when they become a policy holder.

Double address

Some people are fortunate enough to have two homes. Others try to declare a different, lower risk address for where the vehicle is kept as opposed to their high risk postal address in an effort to reduce their premium. Sometimes they have some sort of connection to the other address, sometimes it appears the address is randomly chosen. It is important to register your vehicle at the address that is your main residence.

Not declaring convictions or accidents

Over eight million licence holders have been convicted of speeding in the UK and 600,000 drivers have a drink drive conviction, but a large percentage of those do not declare the conviction to their insurer. Insurers can request a licence check before proceeding with a claim and will then pick up any convictions. Also details of accidents are held on an industry wide database and accidents can be checked. So ensure you declare any accidents and convictions to your insurer at the time of taking out the policy and keep them updated at renewal time.

Annual mileage

Some people may misjudge how many miles they are doing per year and may actually submit too many miles, however, there are a minority who are declaring far fewer miles than they actually drive in a bid to reduce premium.

A good way to accurately declare annual mileage would be to consult your MOT certificate which will clearly state how many miles have been driven in the 12 months between MOT checks or to check your car's service history booklet where mileage is also recorded.

Fronting

A fraud called fronting occurs when a young person is the main driver of a car, but the insurer is falsely told that a parent or other older person is the main driver. This means the young driver is not fully declared and will not be able to accrue any no claims bonus. It is important that insurers are covering the appropriate risk with the correct premium; otherwise this premium will have to be borne by other, honest customers.

Incorrect information given

In an attempt to get a cheaper insurance quote people have declared wrong age, wrong sex, the wrong payment method, omitted car modifications or even the wrong car on occasion. The incorrect information is often so blatant that there would be no way they could ever claim on their policy.

Fraud statistics show that:

Fraud costs the insurance industry over £1.6 billion a year, money that has to be passed on to customers

This equates to £4 million per day and increases insurance premiums for honest customers by up to £60 per policy

1% (400,000) of all drivers are unlicensed and these drivers are up to 9 times more likely to have a crash than licensed drivers

Simon Warsop added, "As the nation feels the pinch from the credit crunch, more and more people think that they can get away with dishonesty for what is seen as a victimless crime. Insurance fraud is certainly not a victimless crime. The victims are actually the majority of honest drivers who are subsidising the dishonest ones."

"The whole point of insurance is to cover the costs for a potential future loss, so running the risk of invalidating your insurance by knowingly providing false information is false economy. Honesty is definitely the best policy, and I would certainly advise against ‘massaging your details' in order to get the cheapest quote. In times of economic turmoil insurance cover is more important than ever so don't jeopardise your cover by giving false information."