News from PracticeInsure

Cash struggles spark boom in underwriting fraud
Mon 23rd Feb 09 - 15:31

Insurance Times Magazine have in the last month published an article on 'Cash struggles spark boom in underwritting fraud' As the credit crunch wrangles on, insurers are seeing evidence of increasing underwriting fraud, costing honest motor insurance customers between £50 and £60 per policy.

In an 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: "Fortunately, the majority of customers are entirely honest and provided 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 include: incorrect claims discount; double address (where policyholders use a lower risk address for where the vehicle is kept); not declaring convictions or accidents; declaring a lower annual mileage; fronting (where a young person is the main driver of a car, but the insurer is falsely told that a parent is the main driver); and simply giving incorrect information.

Statistics show that fraud cost the insurance industry more than £1.6bn a year, which equates to £4m per day and raises premiums for honest customers by up to £60 per policy.  On top of this, 1% (400,000) of all drivers are unlicensed and these drivers are up to nine times more likely to crash than licensed drivers.

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