The rising cost from bogus and exaggerated personal injury claims, are just one of the reasons behind the dramatic increase in the price of a motor insurance quote. The cost of comprehensive insurance has rocketed by more than 12% between April and June and more increases are expected. This will come as another cruel blow to drivers on top of the ever increasing fuel prices and the coalition government’s plan to increase tax on insurance premiums. The annual premium for third party insurance, which is very popular with younger drivers in older, cheaper vehicles, increased almost 16% to £1,225. This dramatic increase comes despite a marked fall in both road accidents and car crime.
Edmund King, the president of the AA said that these statistics were failing to show up an increase in insurance fraud scams. At the start of this year a court judge imposed record damages of £400,000 on a gang who caused accidents and would then claim for both damage to the vehicle and personal injuries from the accident. Worryingly, a survey conducted last year suggested that nearly a million motorists have considered faking an accident in effort raise money because of the recession.
But Mr King said: “Last week’s crime figures suggested crime levels were falling but crucially it missed a new 21st Century wave of fraud, such as providing false information and claiming for non-existent personal injuries, which just isn’t being picked up. It’s now much easier to get an insurance quote online, for example, comparison sites can enable dishonest individuals to manipulate information to get a lower premium. Insurers are increasingly charging higher prices to these people to cover the increased fraud risk.”
Another dishonest practice said to be on the increase is driver’s deliberately providing false information when applying online in a bid to get a cheaper insurance quote. Last week the ABI (Association of British Insurers) said that they estimated the cost of fraud in both home insurance and motor insurance had risen by a massive £1.9 billion per year, which costs the average householder an extra £44 per year in higher premiums.
Simon Douglas, a director of insurance at the firm who carried out the research has warned that the cost of car insurance looks almost certain to rise further saying “Insurers have been making huge underwriting losses, some estimates suggesting that for every £1 taken in premiums, £1.22 is being paid out in claims. Since January last year, average quoted premiums have risen by over 30 per cent and I won’t be surprised if, by the end of 2010, we’ll have witnessed an unprecedented 50 per cent rise in just two years.”