Because the cost of car cover is based on where the car is kept overnight, some drivers are filling in applications with a bogus postcode.
The trouble is although car insurance is cheaper with this ruse; the insurer will check the address the car is kept at tallies with the driver’s details.
If they don’t, the claim is rejected and the driver could face fraud charges by trying to obtain cheaper car insurance by giving false information.
Changing the postcode is a simple way to save hundreds of pounds on car insurance as the margin between a low and high risk area in some cities can be huge.
The postcode trap can also catch out shift workers. Most insurers want to know where a car is kept overnight because the vehicle is vulnerable and unattended.
Shift workers may live in a low risk area and give their home postcode on a car insurance application, but work in a high risk postcode where the car is left overnight.
If the insurer is unaware of this and quotes on the wrong risk, the driver could have a claim rejected.
“If the police suspect that the customer was aware of or involved in the fraud, they have been known to seize vehicles and arrest them for fraud,” warns Emma Banks of insurer LV=.
“Some brokers also fill in several applications with the same address details, which is something insurers are beginning to figure out.”
The postcode scam is taking over from ‘fronting’, say insurers, which involved a low risk driver taking out a policy to save money for a high risk driver.
Fronting typically involved parents taking out cheap car insurance for children or relatives signing up for a policy for someone with a high number of traffic convictions.