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The Actuary The magazine of the Institute & Faculty of Actuaries

Half of drivers think it acceptable to fraudulently cut insurance premiums

It has been found that 49% of motorists believe it is acceptable to reduce car insurance premiums for younger drivers by insuring the vehicle in a parent’s name, according to AA.

Cost of insurance for young drivers is "eye-watering" ©iStock
Cost of insurance for young drivers is "eye-watering" ©iStock

Known as ‘fronting’, a parent will have their child insured to drive a vehicle in which another person is supposed to do most of the driving, when in fact the child is the main driver.

This fraudulent method gives the same level of cover to an occasional driver as it does to the main driver, significantly cutting the cost of getting separate cover, which is now typically £1,436 for someone aged 17-22.

AA insurance director, Michael Lloyd, said: “The cost of insurance for a new, young driver is often eye-watering, so it’s understandable that families might want to look for ways to cut that cost.

“For many people, a parent insuring a youngster’s car and adding them to the policy as an occasional driver might seem to be a legitimate way to get costs down, but they may not recognise the potential consequences.”

A young person whose parent has ‘fronted’ an insurance policy could face prosecution if found guilty, and although the insurer will still cover any costs incurred in the event of an accident, this will ultimately result in higher premiums for everyone.

“Fronting is not a victimless crime – the consequences have to be borne by everyone,” Lloyd said.

AA’s analysis shows that premiums are more than double the price for 17-22 year-olds than they are for people aged 30-35, although for a newly qualified driver, with no no-claim bonus, it could be much higher.

However Lloyd points out that: “A quarter of young drivers aged between 17-24 will have a crash within two years of passing their driving test thanks to a combination of youth and inexperience.

“They are also much more likely to be in collisions that involve death and serious injury. That’s why their first couple of years’ premiums are so high.”

There are now calls for the government to cut Insurance Premium Tax (IPT) for young drivers, and have them adopt telematic insurance policies which track driving data such as speed.

“Young drivers using telematic insurance, which tracks driving behaviour, are around a third less likely to be involved in a crash,” Lloyd continued.

“If IPT was cut completely for them, it would save up to £300 on a typical first premium for an 18-year-old and would discourage parents from taking extreme and illegal measures to cut costs, such as fronting.”