Why you should never lie to your insurer

Giving false or misleading claims to insurers is a surprisingly common practice, but it could cost you.

We’ve all told a fib at one stage or another, but the number of us making misleading claims for insurance is staggering.

One in four people lie when they make home insurance claims, according to a new survey from the website myvouchercodes.co.uk. The research, which covered 1,826 people, also found that more than one in three people lie with car insurance claims.

Moreover, among the people who said they had never lied in their insurance claims, a majority said that they would lie if they thought they could get away with it!

Yet at the same time, insurers are doing more than ever before to crack down on insurance fraud. In 2009, the Association of British Insurers (ABI) says that insurers exposed 2,300 fraudulent claims every week.

If you get caught, then you can lose out on your insurance payout and even be prosecuted for fraud, which can mean years behind bars.

There’s clearly a gap between reality and public belief here. So, in what ways can you make a misleading/fraudulent claim, and what are the consequences?

Car insurance – Fronting

This is an illegal process where one driver claims that they are going to be the main driver of a vehicle, but then in reality allows another person to drive the car more than them.

The classic example of this is with parents of children that have just passed their driving test.

If a parent does lie to their insurer about who is the main driver of the car, then there could be serious repercussions.

For instance, if the younger driver crashes, then the insurer could decide not to pay out. If that happens, then technically he has been driving without insurance, which entails a possible ban from driving, six points on the license and a £200 fine. Try getting a good insurance deal after that.

The high prices of insuring young drivers make it tempting for parents to do this, but the fact is that you have to be honest about who is the main driver on the car.

But it’s not just parents and young drivers that could be fronting (deliberately or not). It can apply to any situation where the main driver on your insurance scheme is not the same as the main driver of the car in reality.

If you’re not sure, then by far the best thing to do is to get in touch with your insurance provider and ask them for their advice. That should take away the danger that you’ll be accused of fronting.

Check out This lie could cost you thousands for more information on fronting.

Home insurance

In the survey from myvouchercodes.co.uk, more than half of those who lied about their home insurance did so after a robbery in their house, where they then asked for better products. Even more dishonestly, 8% said that they had deliberately damaged something in their home in order to make a claim on their home insurance.

Insurers are quite coy about how they monitor whether fraud is taking place. What they do recommend is keeping receipts or credit card statements as proof of purchase, particularly for expensive items. If you can’t produce receipts for the items you claim for, then you might find your insurer checking up whether you are lying or not.

See The eight biggest home insurance mistakes for more tips on what not to do when organising home insurance.

Life insurance

A common problem with life insurance is “non-disclosure”, where someone gives incorrect/incomplete information to their insurer.  

Life insurers can take into account a whole range of factors when considering your premium: age, health, lifestyle, postcode, and even the health problems that other family members suffer from.

Certain health problems, like smoking or obesity, may affect what kind of deal you get. There is a temptation to lie, as you’ll save substantial amounts by doing so.

Yet here again, you’re unlikely to get away with it. Insurers won’t give away large sums of money without doing proper checks.

If, for example, you claimed to them that you didn’t smoke, and then you die of lung cancer, then that would probably be something they’d investigate. It wouldn’t be you who lost out if they decided not to pay. It would be your family.  

What are the consequences?

As an individual, if you do make a fraudulent claim (deliberately or not), then in most cases you can lose your insurance and even be prosecuted for fraud. This will obviously have a negative impact on your future ability to get insurance.

It can also harm people close to you, as the life insurance example above showed.

It’s worth being aware that you aren’t necessarily safe if you already have insurance for yourself, your car or your home. As Emma Lunn points out in her article I want to lie to my insurer, some insurance providers will only do their most thorough checks on you when you make a claim, so it is then that you are most likely to be caught for lying.

Looking more generally across society, fraudulent insurance claims hit everyone. The Insurance Fraud Bureau estimates that undetected general insurance claims fraud costs £1.9bn a year, with £350 million coming from fraudulent car insurance claims.

This adds an average of £44 to the average customer’s insurance bill.

What can you do?

Without wanting to be trite, honesty really is a virtue here. Be as honest as you can when organising insurance and when making any claim. If you are unsure about any questions that the insurer is asking, then get in touch with them and give them the relevant information, and let them make the decision.

That way, you shouldn’t ever have to worry about the insurer not paying out if you make a claim. If you suspect someone has committed fraud, then you can contact the Insurance Fraud Bureau’s Cheatline on 0870 850 4431 or you can fill in an online form here.

More: Allow your car insurer to spy on you and save £££ I The most important reason to take out life insurance