It has come to light by a major insurance aggregator that thousands of well meaning parents are committing insurance fraud by insuring themselves on a vehicle and having their sons or daughters added onto the policy as a named driver when they are in fact the main driver of the vehicle. Whilst it is widely known that this has been going on for a long time, the extent to which it occurs is quite astonishing with up to one in six young drivers adopting this fraudulent strategy. Nearly one in three (30 per cent) rely on financial help from parents to cover average yearly running cost of £1,753 or 22 per cent of their typical income.
The practice, called ‘fronting’, happens where a lower-risk and usually older driver insures a vehicle in their name as the main driver – even though it is the higher risk ‘second’ driver who will really be behind the wheel most of the time.
It is a dodge often used by well-meaning parents trying to save money for their hard-pressed student offspring to reduce the pressure on the ‘bank of mum and dad’ who would be asked to bail them out. However ‘fronting’ can have serious financial and legal implications. If detected, insurers can refuse to pay out for any claims, or can settle a third-party claim and attempt to recover the cost from the parent as policyholder.
Even worse, if the insurer declines to pay out on a claim, the young driver could then be treated as ‘uninsured’ and could be fined hundreds of pounds , face prosecution and an automatic driving ban. They will also face higher insurance costs in future.
Driving a car on a road or in a public place without at least third party insurance is illegal. The consequences of driving without insurance include a fixed penalty of £300, six penalty points and the risk of having the car seized and destroyed.
According to the AA, uninsured drivers cost the insurance industry around £380m a year and add around £33 to the cost of every motor insurance policy.
However, to avoid a conviction for insurance fraud, if you’re ever in doubt about anything to do with any insurance policy you should always ask your insurance adviser, like the knowledgeable guys here at Comparecrazy.com. The business insurance comparison site!