Honesty is the best insurance policy

Article date: 15 December 2008

Insurance fraud costing cash strapped Britain £1.6 billion a year1

As the credit crunch wrangles on, insurers are seeing evidence of increasing underwriting fraud, costing honest motor insurance customers between £50 and £60 each per policy2.

In a desperate attempt to slash the price of motor insurance premiums, people are declaring false information perhaps unaware that their insurance may be invalid as a consequence.

Simon Warsop, director of motor pricing at Norwich Union, said, "As the largest insurer in the UK we're at the forefront of the fight against fraud for the benefit of our honest customers.  We have systems in place to identify policies that are bought using fabricated data, so when declaring information for an insurance quote it's essential that customers have supplied accurate information to ensure they have adequate cover in the event that they need to make a claim."

"Fortunately, the majority of our customers are entirely honest and provide accurate, fully disclosed information when they call or go online for a quote.  However, there are dishonest people that risk invalidating their insurance by giving incorrect information in a bid to get cheaper motor insurance."

Examples of the main types of underwriting fraud:

Incorrect No Claims Discount (NCD)

In a bid to get a cheaper quote people are claiming more years of no claims than they have actually accrued, either through misunderstanding or deceit.  NCD relates to the policy holder and the vehicle, not to anyone who happens to be named on an insurance policy, so unless the insurance policy is in your name you are not able to claim for your NCD.  If you have more than one vehicle then you need to build up NCD on each vehicle.  Insurers including Norwich Union will consider offering an introductory NCD to named drivers with clean records when they become a policy holder. (Please see appendices for case study example).

Double address

Some people are fortunate enough to have two homes. Others try to declare a different, lower risk address for where the vehicle is kept as opposed to their high risk postal address in an effort to reduce their premium.  Sometimes they have some sort of connection to the other address, sometimes it appears the address is randomly chosen.  It is important to register your vehicle at the address that is your main residence.  (Please see appendices for case study example).

Not declaring convictions or accidents

Over eight million licence holders have been convicted of speeding in the UK and 600,000 drivers have a drink drive conviction3, but a large percentage of those do not declare the conviction to their insurer.  Insurers can request a licence check before proceeding with a claim and will then pick up any convictions.  Also details of accidents are held on an industry wide database and accidents can be checked.  So ensure you declare any accidents and convictions to your insurer at the time of taking out the policy and keep them updated at renewal time.

Annual mileage

Some people may misjudge how many miles they are doing per year and may actually submit too many miles, however, there are a minority who are declaring far fewer miles than they actually drive in a bid to reduce premium.

A good way to accurately declare annual mileage would be to consult your MOT certificate which will clearly state how many miles have been driven in the 12 months between MOT checks or to check your car's service history booklet where mileage is also recorded.


A fraud called fronting occurs when a young person is the main driver of a car, but the insurer is falsely told that a parent or other older person is the main driver.  This means the young driver is not fully declared and will not be able to accrue any no claims bonus.  It is important that insurers are covering the appropriate risk with the correct premium; otherwise this premium will have to be borne by other, honest customers.  (Please see appendices for case study example).

Incorrect information given

In an attempt to get a cheaper insurance quote people have declared wrong age, wrong sex, the wrong payment method, omitted car modifications or even the wrong car on occasion.  The incorrect information is often so blatant that there would be no way they could ever claim on their policy.  (Please see appendices for case study example).

Fraud statistics show that:

  • Fraud costs the insurance industry over £1.6 billion a year, money that has to be passed on to customers1
  • This equates to £4 million per day and increases insurance premiums for honest customers by up to £60 per policy2
  • 1% (400,000) of all drivers are unlicensed and these drivers are up to 9 times more likely to have a crash than licensed drivers4

Simon Warsop added, "As the nation feels the pinch from the credit crunch, more and more people think that they can get away with dishonesty for what is seen as a victimless crime.  Insurance fraud is certainly not a victimless crime.  The victims are actually the majority of honest drivers who are subsidising the dishonest ones."

"The whole point of insurance is to cover the costs for a potential future loss, so running the risk of invalidating your insurance by knowingly providing false information is false economy.  Honesty is definitely the best policy, and I would certainly advise against ‘massaging your details' in order to get the cheapest quote.  In times of economic turmoil insurance cover is more important than ever so don't jeopardise your cover by giving false information."

- ends -


NCD validation

In order to get a cheaper insurance quote from Norwich Union, a man took out a policy stating that he had not made an insurance claim in 8 years.  He was asked to submit documents as evidence of his no claims discount within 30 days of the policy starting.  He did not produce any documentation and when he was involved in an accident, he was asked again to produce the proof of his no claims.  Again he failed to do so.  An insurance claim was made against him and he accepted liability for the accident. 

When speaking to his previous two insurers it transpired that he had made claims whilst insured with them and never produced any proof of his no claims although he stated that he had not made any claims prior to taking out insurance with them. 

It was agreed by all three insurers that the man had lied about his circumstances in order to obtain cheaper motor insurance.  All three insurers took him to court.  The man was made to pay all court costs and the cost of all three third party vehicles as well as the repairs to his own vehicle.

Cost to policy holder - approx £50,000

Different address

A man living with his girlfriend in London told Norwich Union his home address was his mother's home in Braintree, Essex, in order to get cheaper motor insurance.  His car was registered at his actual address in London.

He was involved in an accident but did not notify Norwich Union.  When the third party's insurance company approached his insurer, Norwich Union then needed to contact him to confirm liability.

Norwich Union first called the telephone number at his registered home address in Braintree where his mother answered the phone.  She explained that he did not live there and that he hadn't lived there for over a year.  She gave Norwich Union his actual address and his mobile phone number.

Norwich Union phoned his mobile and this was answered by his girlfriend.  His girlfriend explained that his insurance is registered at his mother's house as it works out much cheaper than registering his motor insurance at his London address. 

After several letters to the customer, the policy was void at the point of inception and the third party successfully claimed directly from him.

Cost to fraudulent policy holder - £17,000


A man insured his son's car as the main driver although it was actually his son who was the main driver of the car.  The car was involved in an accident and the son confirmed he was driving and did not deny liability. 

When asked by the claims handler why was he driving his father's car, he responded that he was not driving his father's car, it was his and that they insure the car under his father's name as it works out a lot cheaper.

The policy was void and the third party claimed directly from the son, as he was the owner of the vehicle.

Cost to fraudulent policy holder - £10,000


A customer took out insurance with Norwich Union for a basic model Honda Prelude.  The vehicle was involved in an accident and when it was taken in for repairs it became very clear that the customer's vehicle was not a basic model.  The car had been modified with full body kit and other performance enhancing upgrades.  

Because none of the modifications were declared to his insurer, the vehicle was underinsured and the policy was void at the point of inception, leaving a large repair bill for the customer.

Cost to fraudulent policy holder - £4,000

Press office contacts:

Adam Cracknell, Norwich Union press office, 01603 684 916, adam.cracknell@norwich-union.co.uk

Notes to Editors:

1 Source: ABI Fraud Review 12/4/06
2 Source: Norwich Union data 2008
3 Source: Norwich Union (Norwich Union Direct) research on DVLA data - July 2008
4 Source: DfT Road Safety Research Report Number 48 ‘Research into Unlicensed Driving Final Report November 2003'

Norwich Union is the UK's largest general insurer with a market share of around 15%, with a focus on insurance for individuals and small businesses.

It is a leading provider of life, pensions and investment products and one of the largest Financial Adviser (FA) providers.  FAs provide over 70% of the company's long-term savings business in the UK.

In the summer of 2009 Norwich Union will change its name to Aviva.  Aviva is the world's fifth largest insurance group and operates in 27 countries.  Aviva is to become the customer brand worldwide, thus enabling the company to compete even more effectively on a global scale for the benefit of customers, staff, business partners and shareholders.

Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media.

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