Putting the brakes on the crash-for-cash insurance fraud

Every driver is paying an astonishing £80 a year extra on their car insurance to cover the cost of fraudulent claims….and insurers expect the personal motor market to stay unprofitable for the next five years.

At the same time car insurance costs are continuing to rise despite the overall number of accident claims falling. According to the AA, annual car insurance costs have already hit the £1,000 a year barrier for many drivers.

The Financial Services Authority (FSA) estimates insurers handle 30,000 fraudulent accident claims (mainly crash for cash scams) every year.

The response from insurers seems to be to throw money at managing claims by putting up the costs of car cover for innocent drivers. This way, it’s everyone else who pays the price of crime, not the insurers. The problem seems to be the system.

All drivers must have a valid car insurance policy offering at least minimum third party cover. For years, the motor insurance industry has reaped the benefits of this law by selling in to a captive market. Perhaps minister should apply similar lateral thinking to car insurance, as the Comprehensive Spending Review is to benefit payments.

Crooks are exploiting the open-end, uncapped injury compensation cash-dispenser offered by car insurance. They know that if they dink in to an innocent driver, the insurance will pay out for a hyped up injury claim.

This is a financial process no one can afford and was unforeseen by the implementation of the law. Drivers, via the levy applied by their insurers, cannot keep paying out under these circumstances.

What has to change is the reasons why compensation is paid. The Insurance Blogger does not pretend to have a solution, but reversing who pays might be a step forward.

If you collide with me, why should I pay compensation to you if it’s not my fault? Setting a compensation threshold that increases the cost of insurance means fraudsters would have to pay out more to get more back off their own policies.

The policy would not change for road users outside the claimant’s car at the time of the crash; only for those inside who suffered minor injuries, like whiplash or a broken bone. Anyone seriously injured would still qualify for the full limits of compensation, but the crooks would lose out.

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