Fronting: the acceptable face of insurance fraud
During the insurance application stage, 'fronting' happens when someone buying car insurance claims to be a named driver on a policy when in fact they are the main driver for the vehicle.
So why do they do it? A younger driver can reduce the cost of their car insurance by declaring someone older or more experienced is the main driver for a car. The premium is then calculated based on the experienced 'front' being the main driver when in fact it is the younger driver who is the primary user of the vehicle.
As the young/inexperienced driver is misrepresenting facts for financial gain, it is clear they are committing fraud. However, if you talk with someone from outside the insurance industry about fronting two things tend to happen.
1) They are genuinely surprised to hear it is classed as insurance fraud.
2) Their immediate next response is ".....but everyone does it".
So how widespread is fronting, what are the implications and what can be done to either detect or prevent it?
The frequency of fronting
Though difficult to detect, it is believed that fronting occurs in 20-25% of policies for young drivers.
In August this year, GoCompare commissioned a study into fronting in the UK and found the following:
23% of parents surveyed admitted to insuring a young driver's car in their name
The figure was 41% for Wales which has the highest rate of fronted policies in the UK
56% of parents said they would consider being named as the main driver for cheaper insurance
The high figures can possible be attributed to the fact that most people think it is harmless and they are not committing fraud. Recent research by YouGov in the UK found that 90% of respondents did not know fronting was a type of insurance fraud.
The most recent study on fronting in Ireland was carried out by the AA in 2017. They reported the following:
4.5% of parents admitted they are listed as the main driver for their sons or daughters car
A further 9% of parents admitted to fronting in the past
17.6% said they would be tempted to do it
Parents aged between 46 and 55 were most likely to have having done it or would consider doing it
These figures appear to be low when compared with the UK but may understate the issue as the study is over 5 years old and was carried out by the company the respondents bought insurance from (rather than an independent third party).
The repercussions of fronting
If fronting has occurred, it will most likely not be discovered until a claim is made. If the insurer concludes that fronting has occurred then some or all of the following can happen:
the policy will be cancelled and this will impact the cost of any future policies
the insurer will not pay for the damage to the vehicle and the main driver (often the parent) will be liable for the cost
If there are third parties involved then the insurer will pay the claim and look to recoup it from the main driver on listed on the policy
the main driver may get a conviction for insurance fraud
the main driver will be added to the insurance fraud register (UK only)
Detection and prevention
Fronting is most likely to be discovered when a claim is made. If the insurer suspects fronting they may initiate an investigation to confirm who was driving the car when the accident occurred, who is the registered owner of the vehicle and if there is any CCTV footage showing who regularly drives the car.
Ideally it would be easier to identify potential fronting when the policy is being bought. This can be done by integrating with Gatepost to capture the Vehicle Registration Certificate during the quote process and verify the vehicle owner.
A more manual process is to request a copy of the Vehicle Registration Certificate after the policy is bought but this creates friction with the customer and increases onboarding costs for insurers and brokers.
'Fronting' is one of the biggest problems facing the car insurance industry. It is very difficult to detect at the point of quote and is often not uncovered until a claim is made.
Fronting can also be considered to be the acceptable face of insurance fraud as it is not seen as being a type of fraud by the majority of people. One of the simplest and possible most effective ways of reducing fronting may be simply to educate people about it and the potential implications if they are caught.