Kevin Perkins, head of defence at Carpenters Group, highlights that insurers and brokers must do more to educate parents of new drivers around insurance fraud risks
As a parent myself, I am acutely aware that our children’s understanding of the world, including ethical boundaries and financial responsibilities, is largely shaped by the behaviour and actions of their primary caregivers.
Early exposure to discussions about right and wrong, honesty and the consequences of bad behaviour lay the groundwork for their future decision-making.
In the context of insurance fraud, parental education can serve a number of functions and help to equip younger generations with the tools they need to avoid falling foul of unscrupulous individuals who seek to deceive them. This may involve, for example, breaking down insurance concepts into understandable terms and explaining the principle of fraud – as well as its consequences.
However, there is also an educational need for parents themselves.
In a desire to reduce costs for their children, particularly during a cost of living crisis, they may find themselves unwittingly partaking in insurance fraud. A prime example is ‘fronting’ – a common practice where an older, more experienced driver, typically a parent, declares themselves as the main policyholder for a vehicle primarily driven by a younger, higher risk driver.
While seemingly a harmless way to lower premiums, fronting constitutes insurance fraud. The policy is being taken out via fraudulent misrepresentation.
For parents caught fronting, the penalties can be severe. For example, in the event of an accident and subsequent claim, the insurer can invalidate the policy, leaving the parent and child without cover and potentially liable for significant damages.
Insurance brokers, in my view, have a vital service to play. As intermediaries between insurers and policyholders, they are often the first point of contact for individuals seeking cover and therefore possess a unique opportunity to educate and guide their clients.
For brokers, understanding, identifying and ultimately calling out fraud red flags is crucial.
Their role extends beyond merely selling policies – it ought to encompass proactively informing clients, especially parents, about what constitutes insurance fraud and the serious consequences this activity entails.
Education is the key. Insurers should provide informative sessions targeting parents who have children about to buy their first motor policies.
Such sessions should outline the issues modern drivers face – not just in relation to fronting, but also in respect of ghost broking, which is on the rise.
