What is motor insurance fraud?

According to the Association of British Insurers (ABI), 2023 saw 45,800 fraudulent motor insurance claims worth £501 million in the UK, which accounts for 54% of all claims made in 2023. This figure accounts for just the fraudulent claims that were detected, though. 

Motor insurance fraud isn’t just committed by individual opportunists but can be the work of highly organised criminal gangs. It’s, therefore, a serious form of crime that drives up premiums for honest drivers and costs the industry vast sums of money each year.  

As a result, the government established a new Insurance Fraud Charter in 2024, which serves as a voluntary agreement between the government and the insurance sector aimed at reducing fraud.   

Types of motor insurance fraud  

Motor insurance fraud comes in many guises, ranging from subtle misrepresentation during an insurance claim to more elaborate criminal schemes. Some of the most common types of fraud include: 

• Accidental fraud – this happens if you forget to update your insurer about any changes to your circumstances, from moving house, to whether your car is used for business travel or not. In this case, your insurer may accept it as a mistake and require you to pay any additional premium that would’ve applied when you took the policy out. Alternatively, if regarded as a misrepresentation, your insurer could cancel your policy or reject a claim.  

Application fraud – involves a number of situations, including: 

• Fronting: listing someone, such as a parent, as the main driver, when the actual main driver is someone less experienced.  

• False information: providing inaccurate information on your insurance application, such as your occupation or annual vehicle usage, to lower your costs. 

• Undeclared modifications: failing to report any changes to your car that may affect its value or performance. 

Claims fraud

• Exaggerated claims: when the extent of damage or injuries, such as whiplash after an accident, is exaggerated to increase a claim. 

• Inaccurate claims: when someone deliberately omits details from a claim so that they benefit financially. 

• Imaginary passengers: where a claim is made for injuries to people who weren’t in the car at the time. 

• Pre-inception fraud: when people attempt to claim for incidents that occurred before their policy was active. 

Staged or induced accidents

• Crash for cash: when people deliberately cause an accident to claim an insurance payout. 

• Flash for cash: similar to crash for cash, but where someone flashes their lights to let a driver go, then crashes into them and claims the victim was at fault. 

• Slam on: involves someone braking suddenly, causing the person behind them to hit them, so that they can make a claim.  

• Vehicle dumping – when owners abandon or destroy their vehicle, then falsely report it as stolen to claim insurance money. 

• Ghost broking – is a type of scam that targets drivers who are looking for cheap car insurance. Fraudsters will either sell fake policies to unwitting drivers or falsify information given to insurers to reduce the premium cost, leaving drivers without valid insurance. 

• Insurance claim scams – can involve compensation scams, where you receive a call claiming you’re owed money from an accident, or spoofing, where a scammer claims to be your insurer after an accident and directs you to a fake website to make a claim.   

If you're ever unsure about your policy details or any claims you’re involved with, it's always best to consult your broker or insurer for advice. 

What are the legal consequences of committing fraud?  

Committing insurance fraud is a serious issue and can result in a number of legal consequences, even if it occurs as a result of an accidental error, rather than a deliberate attempt to deceive:  

• Void policy – if you are found to have made a fraudulent claim, your insurer can cancel your policy, and you may have difficulty finding another company that is willing to insure you in the future. 

• Rejected claims – if your claim is found to be fraudulent, it is likely to be rejected, leaving you significantly out of pocket.  

• Impact on your driving licence – while fraud won’t directly result in points being added to your driving licence, if it involves driving offences, such as driving without insurance due to a void policy, it can result in penalty points, fines, or even disqualification from driving.  

• Financial and civil consequences – in some cases, individuals who commit fraud may be required to pay compensation to their victims. 

• Prosecution – in certain severe cases, fraud can lead to imprisonment. 

Fraud is taken seriously by the insurance industry, as fraudulent claims mean that premiums for genuine customers are pushed up as a result, as insurance companies are forced to find ways to cover their costs.  

How to avoid unintentionally committing motor insurance fraud 

The best way to avoid unintentionally committing motor fraud is to ensure that your insurer has all the correct information on file for you. While you may have provided up to date information when you took out your motor insurance policy, it’s easy to forget to update your insurer if something changes over the duration of the policy. 

Make sure you keep your insurer informed about: 

• Your address – don’t forget to tell them if you move house. 

• Drivers – clearly state who the main driver is, and don’t forget to include anyone else that you’d like to drive the car. 

• Usage – give an accurate figure for your annual mileage. 

• Whether you use your car for work – if you plan to use your car for more than just travelling to and from your usual place of work, let your insurer know.  

• Parking – where you park can affect your insurance. If you have a garage but always park on the road, make sure you’re up front about it. 

• Claims and accidents – insurers will normally want to know about any previous claims or accidents you were involved in within the last five years. 

• Past convictions – make sure you mention any driving convictions or points on your licence. 

• Modifications – if your car has been modified, your insurer will need to know. 

Make sure you’re familiar with the terms and conditions of your car insurance to avoid getting caught out, as even minor errors can result in your claim being rejected.