Fibs, white lies, alternative facts. We all bend the truth from time-to-time, although for most of us that doesn’t include spouting nonsense from the podium of the White House press briefing room.
When it comes to finance, we’re not exactly a nation of truth-tellers. I can relay multiple stories of people who have concealed chronic conditions from travel insurers, long-term illnesses from company health plans and home repairs from household insurance firms.
While keeping quiet may not always be a bad thing (I’m thinking of the time I neglected to tell my sister that her one-year-old daughter ate cat litter while under my care), failing to inform a financial services provider of a key fact is rarely advisable. Yes, you may save money at the outset but if somewhere down the line you need to claim, it may come back to bite you.
Which brings me ‘fronting’. You’ve probably never heard the expression, but ‘fronting’ has long been an issue for motor insurers. It’s a method employed by young drivers – typically those motorists who attract high premiums – to reduce their car insurance costs. Instead of taking out the policy themselves, the car is insured in a parent’s name and the teenager/young adult is referred to a ‘named driver’.
I’m sure this seems like a brilliant idea to someone with their first set of wheels. It’s not; it is regarded as fraud. In fact, the Financial Ombudsman has recently published details of a ‘fronting’ case study following a customer complaint for non-payment of a claim, which it did not uphold. And, in its latest report, the ombudsman notes that a significant proportion of young consumers’ complaints are motoring-related.
Now new research from AA Insurance has found that nearly half of drivers believe that ‘fronting’ is acceptable to save money. And, in a sign that it is usually mum who adds a youngster as a named driver, women were more likely (53 per cent) than men (46 per cent) to do this. In addition, nearly two thirds of those aged 17 to 22 considered this an acceptable way to obtain cover.
But there is a good reason why young drivers face higher premiums: a quarter of them (those aged between 17 and 24) will have a crash within two years of passing their driving test due to a toxic combination of youth and inexperience. They are also much more likely to be in collisions that involve death and serious injury.
According to the latest AA British Insurance Premium Index, the typical quoted premium for someone aged 17 to 22 is £1,436, more than double that for someone aged 30 to 35. But for a newly qualified driver, with no no-claims bonus, it could be much higher than that.
Michael Lloyd, the AA’s insurance director, 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 a “named” (or occasional) driver might seem to be a legitimate way to get costs down but they may not recognise the potential consequences.’
Those consequences could include cancellation of the policy and prosecution for fraud. So, don’t try and pull the wool over your insurer’s eyes, just tell the truth. You know it makes sense.
Helen Nugent is Online Money Editor of The Spectator
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