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The National Fraud Authority recently released its annual report into the level of fraud in the UK. We look at how the Stay Insured campaign is contributing to the efforts to reduce insurance fraud by examining its latest research into ‘fronting’.

The National Fraud Authority’s Annual Fraud Indicator report was published in January and highlighted that in 2008 the cost of fraud was £30 billion. This amounts to £621 per UK adult and demonstrates that fraud continues to be a serious issue for the UK to tackle.

Within this figure, the Association of British Insurers (ABI) estimates that general (i.e. motor, property, accident and health) insurance fraud actually costs the industry £2.08 billion.

Most cases of insurance fraud are identified before a claim is paid out, however the ABI estimates that three to five percent - £29.2 million worth in 2008

  • is paid out on claims which are later

identified to be fraudulent.

That said, insurance fraud is opportunistic by nature, and so some claims go undetected. ABI carried out a survey of insurance companies in 2006 and 2008 to estimate their undetected insurance fraud losses – which showed a 24% increase since 2006. In addition, the Insurance Fraud Bureau (IFB) estimates that £348 million of insurance fraud relates to staged motor vehicle accidents.

ABI research also revealed that 7% of people admitted to having made a fraudulent claim, and 47% do not rule out making a bogus claim in future. Furthermore, the IFB estimates that fraud results in an additional 5% to insurance premiums.

The industry, together with the government, is working hard to address this issue. By monitoring and analysing fraudulent claims, the NFA and IFB

use this knowledge to strengthen their methods of detecting fraud. This two- fold, rigorous approach ensures that the industry is constantly finding new and better ways to tackle fraud.

However, in these difficult economic times, fraud is more likely to occur owing to increased financial pressures. So, as part of the ‘Stay Insured’ campaign, aimed at drivers who may be vulnerable to driving without adequate insurance during the recession, MIB was keen to see how motorists viewed insurance fraud, with particular emphasis on the practice of ‘fronting’.

Fronting occurs when the main driver of a vehicle is incorrectly stated by the policyholder when taking out a motor insurance policy in order to achieve a lower premium.

Working with Aviva, research was commissioned looking at how motorists viewed the practice of ‘fronting’, with seven out of ten respondents unable to correctly define it. A further one in five young motorists admitted to previously, or currently, using a ‘fronted’ insurance policy.

The activity aimed to highlight to consumers that by providing misleading information, motorists are committing insurance fraud, which could invalidate a policy, leaving them exposed to additional costs, and potentially footing the bill, if they are involved in an accident.

The research also indicated a disconnect between drivers’ perceptions of fronting as a “white lie” versus the reality of it as a legal offence: 35% justified the practice as a ‘legitimate loophole in the law’, with a further 10% believing it is a legitimate way of obtaining motor insurance.

There was also some confusion over responsibility for damages in the event of an accident. A third (31%) of drivers wrongly assume that they will be covered if the policy is ’fronted‘, where, in fact, if proven, insurers can refuse to pay for damage to the “insured” vehicle and may


look to recover third party claim costs from the policyholder, driver or both.

MIB and Aviva are using this research to highlight the purpose and importance of insurance, and the potential costs, penalties, fines – and even prosecution

  • attached to ‘fronting’. The story was

covered by the national press, including The Daily Mail, The Daily Mirror and The Independent, plus it was the main feature on BBC2’s Working Lunch. This publicity exercise highlights the personal impact of insurance fraud and encourages motorists to understand the full scope of their motor insurance policy.

Fraud fast facts:

  • £2.08 billion: the cost of general insurance fraud in 2008 (1)

  • 24%: the increase in fraudulent claims from 2006 to 2008 (2)

  • £348 million: the cost of fraud relating to staged motor accidents (3)

  • 5%: the increase fraud adds to insurance premiums (4)

MIB and Aviva found:

  • One in five young motorists has previously, or currently, committed ‘fronting’ (5)

  • 35% believe ‘fronting’ to be a legitimate loophole in the law (6)

  • 10% think it is a legitimate way of obtaining motor insurance (7)

  • 31% of motorists believe that they will be covered if the policy has been fronted (8)





ABI, General Insurance Claims Fraud, July 2009 ABI, General Insurance Claims Fraud, July 2009 IFB, Fighting Organised Insurance Fraud, July 2006 IFB, Fighting Organised Insurance Fraud, July 2006

5–8 MIB and Aviva research with YouGov, December 2009

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