Credit Crunch To Blame For Insurance Fraud And Traffic Jams

Neil Faulkner explains how you can legitimately lower your insurance costs without bending your ethics.

The credit crunch is partly to blame for a rise in insurance fraud, reported the Insurance Times today. What's more, it said that claims specialist Cunningham Lindsey found that the trend is likely to continue.

The credit crunch is also now being blamed for global warming, illiteracy in the under-15s, and this morning's southbound A34 traffic jam between Bloxwich and Walsall.

Whether any or all of these are true, I don't know. What I do know is that insurers are finding more claims that they call 'suspicious'. I believe this is largely because they're looking harder for suspicious claims, rather like hunting for the witches of Salem.

However, as we can afford ever less due to a combination of inflation, cutbacks to overtime hours and rising unemployment, I'm sure that more people are bending their ethics.

The thing is, you must remember that this really does cost other people money, not just insurers. You are stealing from your friends and neighbours, as well as strangers, because we all pay more in premiums to make up for fraudulent-claims payouts. Fraud, then, is definitely ugly. I'm not going to get any higher on my horse about it; I just wanted to point that out.

With that said, if you think more cleverly about what you insure and how, you can legitimately lower your insurance costs without bending your ethics. With the difference that makes, you'll hopefully be able to save enough to cope with the disasters that you couldn't insure.

The questions to ask are: 'What are you likely to claim for?' and 'What insurance do you really need?' Here are some ideas to get you thinking about it.

Mobile-phone insurance

Mobile-phone insurance is expensive when you buy it through your network provider. Unless your mobile is lost or stolen every three years, you would do better to save some of the money you were spending on the insurance and put it into some other insurance that you need.

Alternatively, you can buy much cheaper mobile-phone insurance from a stand-alone provider (search the Web for one). Remember also that your home insurance usually covers your mobile phone to a certain extent, so check out your small print; maybe it's enough for you.

Payment-protection insurance

I'll give PPI just a brief mention, as we have complained about and campaigned against it for years. (By 'we' I mean mostly Fool writer and consumer champion Cliff D'Arcy.)

Read the small-print in your policies that protect payments to your mortgage, loan and credit cards. Ask yourself 'Will it actually cover me if I become sick or am made redundant?' because there are lots of exclusions. You'll also certainly be better off buying this insurance from a stand-alone provider, as it's hugely cheaper than buying from your lender or credit-card company.

Car insurance

Have you caused any accidents in the past 10 years? Is your car still worth anything anyway? If you answered 'No' to both those questions then maybe it's time you considered downgrading your car insurance to third party, fire and theft cover.

Before you do, though, remember that a claim might still be classed as your fault (or partly your fault) if the other driver denies liability and there isn't enough evidence to support your case. If downgrading from comprehensive is too risky for you, perhaps you could increase the excess you pay in order to lower the premium, but ensure you could afford to pay the excess if you have a claim or two.

Contents insurance

With your contents insurance, again, can you increase the excess to pay a lower premium? Also, do you need that extra accidental-damage cover? If you remove that option, a basic policy will still usually cover certain items from accidental damage, such as televisions, satellite decoders, audio and video equipment, radios, and home computers. Watch the exclusions though, because your loose gerbil chewing its way through a DVD circuit board usually won't be covered under a basic policy, for example.

If you don't have children or curious pets then you probably don't need accidental-damage cover. Even if you do, how much damage do you think that you, your kids or your pets are likely to do?

If it's not that much or not that often, again, you should consider ditching accidental-damage cover, because if you claim you'll not only have to pay your excess, but you'll lose your no claims bonus and you'll have a claim registered on your profile. As a result your premium will be higher for many years. Take all these things into account when you decide whether to have this additional cover.

Sticking with contents insurance, can you do without the optional personal-possessions cover away from home? Can't you just carry less stuff, or be more careful? Often the answer to these questions will all be 'No'. Only you can assess the risk to yourself; I'm just suggesting you should think about it.

I hope this has encouraged you to think about your insurances. We're always being told we should spend more money protecting ourselves, but sometimes we can save a pot of money and cut back on our insurance expenditure!

More:  Reclaim Your Rip-Off Premiums! | What Price Should You Pay For Your Travel Insurance? | 21 Ways To Cut Your Car Insurance Costs.