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Car insurance rip-offs, scams and lies

Emma Lunn
by Lovemoney Staff Emma Lunn on 20 September 2011  |  Comments 23 comments

The Office of Fair Trading has announced it's looking into why car insurance premiums go up and up each year. But you don't have to wait for its report to find out the reasons - we can tell you why right now.

Car insurance rip-offs, scams and lies

Last week the Office of Fair Trading announced plans to look into the reasons why car insurance premiums are on the up.

The cost of comprehensive policy rose by as much as 40% in the year ending 31 March 2011 and the consumer watchdog says it wants to “establish the full facts, the reasons behind any increase, and whether there are any consumer or competition issues that need to be addressed to improve the functioning of the market.”

And so it should. This is because despite what insurers tell us about the increased cost of claims, the truth is not as straightforward and it doesn’t make insurers look good.

Personal injury claims

Shockingly, the number of bodily injury claims received by insurers rose by 72% between 2002 and 2010 – yet the number of road accidents actually fell.

This is mainly because of a scam cooked up by insurers and no-win-no-fee lawyers. Basically if you have a minor accident and report it to your insurers it will more than likely flog your details to an ambulance-chaser. For this it receives what’s known as a “referral fee”.

The next thing you know a “claims management company” will inundate you with texts and calls trying to convince you that if you’ve had an accident that’s not you fault and been injured you’ll be entitled to compensation.

They’ll often advise you to make a claim for whiplash which is notoriously difficult to prove. If you decide to go ahead the claims management company will hire a solicitor to do the legal work involved with making a claim against the other driver’s insurer. If you win the case the insurance company will have to pay up, paying you compensation and covering both sets of legal fees.

So how does the insurer recoup its losses? By increasing premiums for all its customers, of course.

Industry experts say legal fees add about £4.1billion to insurance costs – or £121 per policy.


Fortunately this month also saw justice secretary Ken Clarke announce a ban on referral fees, something ministers had previously resisted demands for.

Crashing for cash

Another reason why car insurance premiums keep going up is the increase in “crashing for cash”. This normally takes the form of a staged accident whereby two vehicles deliberately knock into each other, or a deliberate action by a motorist to force an innocent driver to crash into them, such as braking suddenly so they are hit from behind.

The cars’ passengers – and there are often several – then claim for injuries they don’t have, especially whiplash. According to the Association of British Insurers, in 2009 over 2,000 dishonest insurance claims worth more than £16million were detected every week.

And shocking statistics from Moneysupermarket back in July show that 1.3million motorists would consider staging a crash or already have done so.

But getting found out can have dire consequences. Once you’ve been convicted of insurance fraud you’ll find it nigh-impossible to get cover in the future and if prosecuted the worst case scenario could see you end up in prison.

Uninsured driving

Honest drivers who fork out for car insurance are also subsidising those who don’t bother buying cover even though a minimum of third party cover is a legal requirement in the UK.

Official figures show the cost of compensating the victims of accidents involving uninsured drivers is £500 million a year, paid for by honest motorists through their insurance premiums.

New Continuous Insurance Enforcement (CIE) rules mean all car owners need to have insurance whether they’re driving their car or not. It is now an offence to keep a vehicle without insurance unless you have notified the DVLA that your vehicle is being kept off the road and have a valid Statutory Off Road Notification (SORN).

Sneaky fees

As well as bumping up premiums to line their own pockets, insurance companies have other ways of costing you money. For example, many insurers are also guilty of hitting drivers with sneaky fees to cover administrative tasks which in reality bear no resemblance to the actual cost incurred.

Take Admiral for instance. Its car insurance business boosted profits by 28% in the first half of 2011. But the insurer charges a raft of sneaky fees including a £17 fee for sending out new documents, £47.50 for cancelling a policy mid-term, £22.50 for cancelling in the 14-day cooling off period and £5.95 for paying by credit card.

Compare car insurance quotes via lovemoney.com

More: The great car insurance rip-off| The whiplash scam that’s costing you £££

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Comments (23)

  • margaretm
    Love rating 7
    margaretm said

    It would appear that those in the insurance business have decided to join the robber barons (bankers and fund managers)in paying themselves ridiculously enhanced salaries,once again by means of ripping off us ordinary mere mortals.

    Report on 21 September 2011  |  Love thisLove  0 loves
  • easygoing
    Love rating 156
    easygoing said

    Quite right margaretm. It is possible to understand how a young person faced with fees of £5000 to insure their first car might be tempted to drive without insurance and whilst I certainly don't condone this I can put some of the blame on greedy insurers. Solicitors - isn't soliciting living off immoral earnings?

    Is there any honesty left in business these days?

    Report on 21 September 2011  |  Love thisLove  1 love
  • T5P8
    Love rating 33
    T5P8 said

    As a problem solver I always go back to the origin of the problem and it all started when Thatcher started the culture of greed.

    Now look at the mess we're all in. I can't see it reaching a steady state as our government, bankers, corporations, as you say insurance companies have all joined in now.

    When funeral parlour realise they can also get on the greed bandwagon they'll be going through your pockets before they burn you.

    Report on 21 September 2011  |  Love thisLove  1 love
  • easygoing
    Love rating 156
    easygoing said

    I have to agree with you too T5P8, that is exactly when it started. That is the point when we stopped being a society and the 'me' culture started. Selling off our utilities to the 'people' who quickly sold them on to make a fast profit. Selling off council houses cheaply so people again made a fat profit by reselling without a single thought for future generations. Using our oil to line people's pockets rather than invest it in our country. She was allegedly to blame for the MP expenses scandal when she encouraged MPs to be creative with their expenses to combat a pay freeze.

    Report on 21 September 2011  |  Love thisLove  0 loves
  • poppasmurf
    Love rating 31
    poppasmurf said

    I'm one of those greedy individuals ha ha have you seen the job market at the moment. I had a slip and twisted/stretched some ligaments in my knee. Now it took me a while to even think about making a compensation claim. As it was 4 months on and there had been no improvement at all, I made a claim out of sheer frustration. But wait. Anyhow it turns out that, so far, no one wants to get me any justice, they cant explain why. They scurry away and hide like the cowards they are, so not every compensation firm is on the take take. Reading between the lines its something like if it isn't an obvious thing you slipped on in your accident, then we don't want to do the hard work of proving it. They are just LAZY, they only take on the cases that are sure fire winners. Those that require minimum input for maximum return, this is how the system gets robbed blind. Utter time wasters the lot of them. Humph I would settle for there being a steps there rather than a massive path up a steep hill, idiots.

    I don't know how easy they want my case to be, the Council have already admitted fault by handing my complaint to an external Solicitor. Will probably do the compensation claim my self.

    Report on 22 September 2011  |  Love thisLove  0 loves
  • raba9
    Love rating 16
    raba9 said

    Selling off the nationalised industries was one of the best things to happen in the 80's/90's. Isni't it interesting how all those people who say it was a mistake never refer to the number of days those industries lost through strikes, eg a train strike every winter (never in the summer). Selective amnesia is a wonderful thing!

    Report on 22 September 2011  |  Love thisLove  1 love
  • easygoing
    Love rating 156
    easygoing said

    poppasmurf - good luck with your claim.

    Of course those firms are only going to go with claims they are sure they can win. Unfortunately there are people who want to make a claim when there is no negligence involved. Of course the council will have briefed a solicitor, it is standard practice when someone makes a claim against them.

    We have all taken a tumble when it was nobody's fault except our own clumsiness but unfortunately (and I am not including you) some people will make a claim for anything. The burden of proving negligence is understandably on the claimant otherwise we would have a free for all.

    I understand your anger and frustration and I hope your knee recovers soon.

    Report on 22 September 2011  |  Love thisLove  0 loves
  • armenk
    Love rating 2
    armenk said

    The perfect way for a business to make profit and quite literately squeeze as much out of the public as possible - Get Government to make insurance compulsory and now to boost profits make continuous insurance as compulsory so if you have a car then you have no choice but to get insurance and you have no choice but to settle to what ever price they fire away. I am sure this works for the Government as well as I guess the more profit the more taxes to pay.

    Report on 22 September 2011  |  Love thisLove  0 loves
  • AGRI-FIX
    Love rating 2
    AGRI-FIX said

    Well I'm pleased to say I have just reinsured my car and the price dropped by £94 this year and that is with a£20,000+ claim for a written off Toyota Landcruiser four years ago. Maybe some insurers are not trying it on.

    I was with AVIVA and they put their prices up every year but I went to an insurance broker because of this and we discussed a policy to suit my needs perfectly including special mods like bull bar, tow bar, off road tyres, Tachograph etc. The first year was over £800 and this year just over £700.

    Maybe they give loyalty discount unlike some AVIVA.

    Report on 22 September 2011  |  Love thisLove  0 loves
  • Washeavilyindebt
    Love rating 1
    Washeavilyindebt said

    Armenk

    You wrote: "Get Government to make insurance compulsory and now to boost profits make continuous insurance as compulsory so if you have a car then you have no choice but to get insurance".

    Making insurance continuous wasn't to get us all to pay more (because we should have insurance as drivers anyway), it was to make it easier to catch people not bothering to get insurance. If you declare SORN on your vehicle, it doesn't have to be insured. If you don't, the DVLA/Police will quite rightly assume it is being used on the road, and can fine you or seize it.

    So what I am saying, is, continuous insurance wasn't introduced "to boost profits".

    Report on 22 September 2011  |  Love thisLove  0 loves
  • MK22
    Love rating 142
    MK22 said

    Yeah, raba9 and I can remember when the chairmen of utilities, hospital and Councils (etc) didn't get paid thousands of times more salary than their employees, but Maggie stopped that too. Selective amnesia my friend?

    Report on 22 September 2011  |  Love thisLove  0 loves
  • oldhenry
    Love rating 267
    oldhenry said

    This is just another indication of a 'broken Britain'. we are in a mess caused by politicians. Althought Maggies does encourage the capitalists to run riot , Blair did exactly the same. he was a big a capitalist as anyone and his government have wrecked what remains of teh UK economy.

    i see living standrads dropping steeply in teh next decade , a miserable future for most of us. unless you are teh lucky ones to be in jobs where you can milk what remains of the income from the ordinary people.

    As for continuous insurance nonsense the answer is get some Polish numberplates!

    Report on 23 September 2011  |  Love thisLove  0 loves
  • armenk
    Love rating 2
    armenk said

    Washeavilyindebt - I understand what you are saying and I agree with people not driving unless they have insurance but what about people on holidays whose insurance may be stopped while they are still on holiday, or what about If somebody has bought a car to export within a month or so and I understand road tax but to get insurance and then cancel and the pay stupid amounts of cancellation and admin fees. I am sure there can be a better way stop the uninsured and the first one is to completely over haul the way insurance is priced and risk is assessed. Once again this is only hurting the poor and stopping them from owning cars but for the government it is one of their priorities to get as many people on public transport as possible so they know what they are doing. The rich gets richer and gets away with what ever, its always the poor that suffer and our government apparently is not working for the rich.I am very frustrated and unhappy so I may have said some things too much and if I have it is not completely my fault.

    Report on 23 September 2011  |  Love thisLove  0 loves
  • armenk
    Love rating 2
    armenk said

    And when Tesco claims in their ads every little helps they do everything possible to make things good and cheap for us then go and price fix then there really is no honest business left is there. And it has become a very ME ME ME culture very selfish with no care or thought for our elders or any one else as long as they get as much as possible who care how the rest suffer, I am not like that and I am aware I am probably in the minority which is very sad and unfortunate.

    Report on 23 September 2011  |  Love thisLove  0 loves
  • electricblue
    Love rating 643
    electricblue said

    The UK is no more and no less in a mess than any other developed country and I would suggest that is DESPITE politicians. I wish some of the constant moaners on here would get out from under their rocks and look at the many areas of manufacturing and science where the UK is extremely strong. The problem we have with our political leadership of all colours is that well-meaning or just in it for the power trip; very few of those in power have ever invented anything, built up a business from scratch or actually done anything practical. Innovation and manufacturing is what made the UK great and if we are constantly led by people who understand neither at the very deepest level (not just coffee mornings with captains of industry) , there is no way that small businesses can be properly encouraged to become the big businesses of the next decade. I don't see the insurance industry itself being at the heart of this controversy, rather the amoral antics of the legal profession which leaves genuine claimants unprotected and those with less easy to defend but often spurious claims a source of incredible wealth. MK22 - Managers have always been paid many times the salary of the regular workers so be careful what you wish for, especially in the case of local councils. We already have the monkeys and they aren't paid peanuts, so if we paid the peanuts to make you happy, exactly what level of skills would we get?

    Report on 23 September 2011  |  Love thisLove  1 love
  • CuNNaXXa
    Love rating 362
    CuNNaXXa said

    It has been proved, time and time again, that we are Rip Off Britain. What we pay for everything from Bread to Cars is often more than our cousins on the continent, although we are not THE most expensive country, we ARE one of the most expensive countries to live in.

    Quite a few here have commented on selling off the utilities during the 80's. While I agree that some of the utilities may have worked better in the private sector, selling off water for profit was not correct. Water is probably the most important commodity next to air, and it should have remained under the public sector control, instead of being sold off for a profit. Also, when they sold off water, the authority should have been taken from the private companies, as I find it offensive that a private shareholder owned company has authority, which should only be exercised by our own government, and not some exec.

    I should also point out that many privatised industries paid their senior execs many times the salary and bonuses that those same execs earned when their industry was publicly owned, and those bonuses and pay rises come from just one play, our own payslips.

    If you are going to privatise an industry, then you need to ensure adequate competition to ensure that we taxpayers have a choice. When the Post Office became BT, they had a monopoly, and could charge what they wanted. As soon as competition became available, prices started to drop.

    My own father was a civil servant working for the water authority when it was privatised by Maggie. At first he was furious that his status as a civil servant was going to be replaced by the label, 'employee', but he was soon laughing when he saw his pay increase by quite a nice margin.

    I also know of people who bought their own council houses for a significant discount, then tried to flog them for a significant profit. They found that their privately owned homes did not fetch the same value as a similar home in a distinctly private area, as the stigma of being an ex council house is still attached. Besides, many people would spurn buying a private property when either side are owned by the local council, and have tenants, not owners, as their occupants.

    I also know of people who are waiting for a council house to become available because a lady known as Maggie sold off a good proportion of OUR existing stock, just to gain popularity.

    Remember that while discounts of up to 50% were offered, the monthly rent paid to the council for using the house also included maintenance, such as replacement windows, gutters, and emergencies such as plumbing and electrical. This is something that private sector owners have to fork out for themselves. Therefore, the discounts offered were way over the top for the rental paid by the tenants, since they also got a service as well as accommodation.

    At the end of the day, the only loser was the taxpayer.

    In fact, the taxpayer has been a loser for many many years now, funding everything from privatising utilities, selling off council stock, and funding MPs lavish lifestyle.

    If our government really wanted to do something about this scandal, they could do, easily, but they only want to do enough to make us feel that they are doing something, even though they are doing nothing. Regulatory bodies seem to have little or no power whatsoever. Take Ofgem for example. Look what use they have been.

    Get used to being ripped off. We have been since before the 70's. We have been during the 80's, the 90's and the 00's. We will be ripped off during the 10's, and the 20's, and possibly the 30's.

    Report on 23 September 2011  |  Love thisLove  0 loves
  • Mike10613
    Love rating 600
    Mike10613 said

    The insurance industry has always been full of scams and we need more and more insurance now. Car insurance is one of the worst. It's hard to find a industry where we don't have a choice like car insurance, buying housing, energy, water and paying council tax that doesn't have a scam or corruption attached to it. Maybe we need 'honesty' and 'integrity' taught in schools - especially Eton.

    Report on 24 September 2011  |  Love thisLove  0 loves
  • fenemore
    Love rating 205
    fenemore said

    Its a paradox! For as many years as I can remember, companies have complained that they cannot make any money from motor insurance. "It barely covers our costs" is one of the most trumpeted arguments.

    If this were indeed the case, why the hell do they spend millions on TV advertising? Just about every commercial break includes one, sometimes two or even three ads vying for our custom! Why would you actively add these costs to your business, in order to sell something at no profit?

    Its a mystery!

    Report on 24 September 2011  |  Love thisLove  0 loves
  • CuNNaXXa
    Love rating 362
    CuNNaXXa said

    @ fenemore.

    Why would anyone even consider starting a company that couldn't make a profit. If there was no money in it, they'd move to something more lucrative.

    Whenever money is involved, they will always cry that thay are broke. Kerry Katona was declared bankrupt recently, but if she was, indeed, bankrupt, then I must be on the poverty line, because she still had a nice mansion after relocating down south, and still had money for new cars etc. that would be well outside my own price range.

    A millionaire declared, 'I am down to my last million. Oh what am I going to do?'

    The Names at Lloyds of London wanted our government to bail them out when they suddenly found that their investments were not going to fulfil a profit due to insurance payouts. If you invest, it can go down as well as up, but it is your choice, not someone elses, yet these celebrities only wanted their investments to go up, and when they went down, used their celebrity status to try and recover their losses from the taxpayer.

    No one does anything for nothing these days, and certainly those who invest in the insurance game expect, or demand, the maximum return for their investment, and if people have to suffer so that the investment is fulfilled, then so be it.

    Report on 24 September 2011  |  Love thisLove  0 loves
  • UpHillAllTheWay
    Love rating 38
    UpHillAllTheWay said

    T5P8

    "it all started when Thatcher started the culture of greed. " - Ah yes, it all started then. Nobody was greedy before Thatcher told them it was OK to be, and if she hadn't, it never would have occurred to anybody. In fact, I believe she was single-handedly responsible for every kind of scam going today, from boiler rooms to telling people they won fake lotteries that they didn't enter - because nobody is greedy by nature. They all just had their innocence snatched away from them by Thatcher. When a car hammers on its brakes unexpectedly, and another runs up its back end, and the five occupants of the car in front all claim whiplash - that's down to Thatcher - no doubt about it! But tell me ... "When funeral parlours realise they can also get on the greed bandwagon they'll be going through your pockets before they burn you" - how is that going to happen? Is she coming back to power, to point it out to them? Surely, they aren't going to think it out for themselves?

    Poppasmurf

    I'm sorry to hear of your experience, but I'm afraid insurance companies exist to make money - not to give it away. My experience and observation tells me that virtually every claim has a corresponding, obscure clause in the small print that can be interpreted so that they don't have to pay.

    electricblue

    "Managers have always been paid many times the salary of the regular workers" I agree with this, and I recognise the benefit in it, but when an alreay extremely wealthy CEO's salary is increased byt 15%, while the 2,500 workers under him don't get a raise at all, I do find that galling. Remember Fred the Shred, whose nest was nicely feathered for him after he precided over the collapse of RBS. Most people could have been equally unsuccessful, and I often wonder whether the special skills of the people in the board room are really as special as many believe.

    CuNNaXXa

    "It has been proved, time and time again, that we are Rip Off Britain."

    I don't disagree with you, but I'm genuinely puzzled about how it happens. It costs a certain amount to run the infrastructure of a country, pay its military, etc, etc, and where else can it come from except out of taxes? When a politician makes the wildly popular statement that they are going to reduce the xyz tax, you can be sure that the pqr tax is going to get a stealthy hike - because the country hasn't suddenly got cheaper to run, and the money has to come from somewhere. So when we are being ripped off, where does the money go? Let's just say for argument that the average adult gets ripped off for £100 per year (it feels like more!). UK population is about 62 million, of which, I dunno, around 80% is adult. The rip-off sum would be around £4,960 million - almost £5 BILLION. I just can't believe that's "funding MPs lavish lifestyle". It's an awful lot of dosh. In fact, they don't have that lavish a lifestyle. Compared with you or me, they do, but compared with probably the majority of board members of large companies, they don't do anything like as well - and yet, they are the board members of UK Plc! I'm not supporting them, but I do think there's a flaw in your argument.

    Report on 26 September 2011  |  Love thisLove  0 loves
  • poppasmurf
    Love rating 31
    poppasmurf said

    UpHillAllTheWay

    Thanks.

    Reassuringly my "MCL Sprain Grade TWO" hasn't gone away.

    It will take a year and some to heal and even then possibly not perfectly.

    I'm not claiming on health insurance I don't have any.

    I'm making a personal injury claim against the County Council.

    I just felt let down by the system.

    Report on 26 October 2011  |  Love thisLove  0 loves
  • davidbc
    Love rating 0
    davidbc said

    Last year I separated from my wife and moved north from outside London. I moved into lodgings while sorting out new work and where to live. Because of my temporary way of life I have been a victim of Car Insurance companies.

    When I moved I was with Admiral who said that moving from St Albans to a quiet town in Cheshire (Willaston) was increasing the risk and therefore they put up my premium. In May my car insurance was up for renewal and I changed to LV, shortly after taking out this insurance I had to move lodgings to Market Drayton to a very safe and secure little area of the town. LV said this was higher risk and want to charge me an extra £57 on my premium. I am trying to fight this but feel that I have very little option, in fact according to them the only option I have is to cancel my policy which would cost £40.

    So looking at the figures. The original LV insurance cost me £386.50, they now want to add £57.11 for the change of address making a total of £443.61. However, the day after I had contacted them about the change of the address and was advised about the extra premium payment I went onto the LV website and filled in a car insurance for exactly the same details as the original with the one exception that I put in the new address (the one which according to them had a higher risk). The total cost was £403.16 which is a massive £40 less.

    Report on 10 June 2012  |  Love thisLove  0 loves
  • Emma17
    Love rating 0
    Emma17 said

    If anybody is thinking about using a claims management company they should be aware of some of the issues with them, including the level of claims that they make against an insurance company and the issues surrounding who is liable. A first hand account of how long and drawn out the claims process can become can be seen at http://insurancecompanyreview.co.uk/insurancereviews/ - see the account of a person's experience with Direct Accident Management

    Report on 08 May 2013  |  Love thisLove  0 loves

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