There are some basic building blocks that form the foundation of an insurance policy. They enable the insurer to provide cover to the customer accurately, adequately and fairly.
It is likely that you will have discussed material facts with your insurance broker at some point. The industry definition of a material fact is:
“An important fact about you or your circumstances that would influence an insurer's decision on whether to issue a policy and on what terms. Non-disclosure or misrepresentation of such facts can result in your policy being cancelled or your claim being declined.”
If you are ever unsure whether something is material, then simply ask your broker. They will be able to guide you and speak to your insurer and provide clarity.
Deliberate failure to disclose information to an insurer is, surprisingly, more common than you might think. Recent statistics from Aviva make for eye-opening reading, including the following:-
- 33% of motorists admitted to changing more than one detail on their motor insurance application solely to save premium costs.
- 88% of motorists agree that insurance fraud is unacceptable, with 87% acknowledging that it increases the cost of insurance for everyone.
- 17% admit to “fronting” which is insuring a vehicle primarily used by some else in their own name (usually a child's vehicle).
- 27% of motorists admit to considering lying when applying for insurance to reduce the premium.
Aviva further confirmed that they have seen an increase of 16% in the volume of motor insurance policy fraud during October 2022, versus the same period a year ago. This refers to dishonesty during the application process rather than fraudulent claims.
Cost of living increases may be a contributory factor as the insurer reported that it had blocked over 23,000 suspicious applications for motor insurance during October, an increase of more than 3,000 compared with the same period in 2021.
It is worth highlighting that not all of this activity is committed by individuals. Aviva reports that 15% of fraudulent applications rejected were as a result of “ghost broking”. This happens when someone who is not an authorised insurance broker or intermediary acts as one and purchases insurance using false data to acquire insurance cover for the rightful purchaser.
They tend to then amend the policy details prior to release to the innocent buyer to show proof of purchase. The policy itself is worthless as the details provided are false and the penalties can include vehicle seizure and a fixed penalty of up to £300. The owner will also need to obtain valid insurance cover and prove this before their vehicle will be released.
Aviva also dug deeper into ghost broking and established that 20% of those surveyed would consider buying insurance cover from an individual offering cheap motor insurance.25% also said that they'd been approached by someone online with the offer of cheap insurance.
It is relatively simple to check whether a firm or individual is legitimate here: https://register.fca.org.uk/s/ or https://www.biba.org.uk/coming-soon.php
Other examples of fraudulent activity include:
- Applicants simply changing information about themselves to obtain a lower premium (such as where the car is kept or motoring convictions)
- “Fronting”, where typically a parent insures their child's vehicle in their name with the child named as an occasional driver (when, the child is the main user).
A good broker will work with you to arrange cover that meets your requirements and discloses material facts to your insurer in full. Ensuring everything is correctly disclosed will mean your insurer can underwrite your cover properly, at a premium which is affordable.
If you need any more guidance or advice, please talk to your usual Lockton contact today.