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There are a number of ways you could accidentally commit car insurance fraud, including failing to update your provider on changes to your personal circumstances or allowing a named driver to be your vehicle’s main user.
Not only can this invalidate your car insurance policy, but it may also lead to penalty points on your licence, fines and even prison. It also makes car insurance more expensive for everyone, as providers pass the costs of fraudulent claims on to other customers.
Our guide explains the common types of car insurance fraud, how you can avoid being a victim of scams and how you can report suspicious activity.
There are many different types of car insurance fraud, including:
| Type of car insurance fraud | What it involves |
|---|---|
| Accidental fraud | As suggested by the name, it’s possible to commit car insurance fraud by accident. If you fail to update your provider after moving house or changing where you park your car overnight, you could inadvertently invalidate your insurance policy. |
| Application fraud | This is when you intentionally lie about certain details, such as your job title or previous claims, when applying for car insurance. |
| Exaggerated claim | If you have an accident but exaggerate your injuries or the damage to your car, this is a form of car insurance fraud. For example, a driver might exaggerate how severe their whiplash was following an accident. |
| Fronting | “Fronting” is when someone takes out a car insurance policy as the main driver when in fact a named driver is the person using the vehicle more frequently. It often happens when parents take out a policy so their child, a younger driver, pays less for car insurance. |
| Imaginary passengers | This is when you claim for people who weren’t in your car at the time of an accident. |
| Pre-inception loss | Pre-inception loss involves trying to claim for damage to your car that occurred before you took out your current insurance policy. |
| Staged accident | This is when someone purposely crashes their car to stage an accident and make a claim. |
| Undeclared modifications | While installing security features can lower the cost of your car insurance, most modifications increase it. You must inform your provider if you make any changes, such as adding a turbocharger or lowering your suspension. |
| Vehicle dumping | Also known as abandoning a car, this is when someone gets rid of a vehicle – for example, leaves it at the side of the road, burns it or drives it into a body of water – and then claims it as stolen. |
The punishment for car insurance fraud will depend on the scale and severity of the situation.
At the very least, your car insurance will be voided. This means you won’t be able to make any claims, and could find it harder to get a policy in the future.
Other punishments for car insurance fraud include:
Motor insurance fraud made up 59 per cent of all insurance fraud cases in 2022, according to the Association of British Insurers (ABI).
To avoid committing car insurance fraud, you should:
A car insurance scam is a form of fraudulent or criminal activity designed to illegally make a profit. Common car insurance scams include:
This is a staged accident where another driver intentionally crashes into your car so they can make a claim. Examples of crash for cash scams include:
To avoid becoming a victim of a crash for cash scenario, you should:
There’s every chance someone has already tried to scam you by cold-calling you to say you’ve been in an accident and that you can make a car insurance claim. They may ask for your personal or banking details or state they’re from the Motor Insurers Bureau (MIB).
However, the MIB will never call you regarding a claim unless you’ve already contacted the organisation about a claim. Nor will the MIB ask for your bank details over the phone.
To avoid becoming a victim of a compensation scam, you should:
Ghost broking is when a fraudster pretends to be an insurance broker to sell you a cheap – usually suspiciously cheap – car insurance policy that turns out to be fake. Ghost brokers often operate on social media but may also work through word of mouth.
Ghost brokers typically work in one of two ways:
This scam is especially dangerous, as if you get caught driving without valid car insurance, you could face a fine and six penalty points on your licence.
To avoid becoming a victim of a ghost broker, you should:
There are a few ways you can report a scam or car insurance fraud:
There are a range of methods a car insurance provider might use to check if a claim is fraudulent, including:
Although you won’t be banned from getting another policy if you commit car insurance fraud, it will become harder to find a provider, especially one that’s affordable.
One of the reasons car insurance claims can take weeks or months to be resolved is that the provider needs to investigate the claim.
This isn’t just to check whether the claim is fraudulent; it’s also to make sure the correct party takes responsibility for the accident and the right policy pays out.
