‘Crash for cash’ insurance scams push up premiums

Insurance companies are gearing up for a crackdown on fraudulent claims on car insurance as the number of deliberately set-up ’crash for cash’ accidents increases.

According to the Insurance Fraud Bureau, ’induced accidents’ - whereby drivers deliberately cause a crash so as to profit from bogus insurance claims - are becoming a serious national problem.

“The criminal gangs targeting honest motorists are ruthless,” says John Beadle, chairman of the IFB. “Innocent lives are being put at risk and fraudulent insurance claims add approximately £40 to every premium paid by honest policy holders each year.”

In a ‘crash-for-cash’ accident, the fraudulent driver will typically brake suddenly when coming off a motorway junction, causing the car behind to go into the back of them. Drivers involved in the scams have been known to disable their brake lights so that the car behind will have no warning to slow down.

Once the parties involved have swapped insurance details, the fraudsters will start making claims for damage to their cars and for personal injuries they don’t have - and in some cases, making them for people who weren’t even there, often claiming for the maximum number of passengers their vehicle can hold even if they were the only person in it at the time. In some organised crash-for-cash rings, people will act as ’phantom witnesses’ saying they were at the scene of the accident when they weren’t.

Adrian Webb from insurer Esure says: “This is one of the fastest-growing areas of motor insurance fraud. It’s also the most dangerous. Most fraud doesn’t physically hurt anyone, but with this, if the fraudsters get their timing wrong with the brakes, they could seriously injure someone.”

Crash-for-cash fraudsters are likely to claim for whiplash - severe pain and stiffness in the neck, back and shoulders - because it generates some of the biggest insurance payouts but it is difficult for insurers to tell whether a claim is genuine or not.

Because of the nature of the fraud, it is hard to tell whether you have been caught up in an induced accident until your insurer receives a claim for damages from the other party. It can also take months for an induced accident to come to your insurer’s attention since they will only begin investigating it if the witness statements from the claimant don’t add up with the policyholder’s version of events.

Webb says: “You might have told your insurer that there was only one person in the car, but then we’d get a claim through for five people. It’s at this point that we’ll realise that someone is simply trying to make money out of this.”

One of the big drivers of the increase in fraud is the recession, as consumers seek to boost their incomes, and insurers are being hit with more than 2000 false claims a week according to the Association of British Insurers.

”Fraud thrives in a recession, so insurers are intensifying their crackdown on insurance cheats,” says Nick Starling, the ABI’s director of general insurance and health.

With this in mind, insurers have been clamping down on insurance cheats. Esure has introduced something called Cognative Interviewing which is designed to test people’s stories and reveal fraudulent claims. The insurer will run through a claim story a few times and then go through the story backwards. If the claim is real then the consumer won’t mind giving lots of detail but if it is not then they will start to struggle when telling the same story over and over again.