• Niall Kavanagh

Will COVID increase insurance application fraud?

For most people, the term 'insurance fraud' is often associated with an insurance claim where damage or injury is exaggerated. The end goal is to to financially gain from a higher claim payout.

There are many types of fraud that happen when buying an insurance policy (called application fraud). The motivation is also financial but in this case it is to get cheaper insurance.

Application fraud is made possible through the information asymmetry that exists between the person looking for insurance and the insurance provider. For example, the person looking for car insurance will always know more than the insurer about their driving behaviour, how often they use the car, the car condition etc. Any deliberately misrepresentation of the facts to gain cheaper insurance is application fraud.

Types of Application Fraud

The most frequent types of application fraud include:

Non-Disclosure - It is common knowledge that previous claims and penalty points will result in higher insurance costs. By deliberately not disclosing this information when buying insurance, an individual is attempting to commit insurance fraud.

Fronting - Fronting happens when an individual states they are a named driver on someone else's motor policy when in fact they are the main driver of the car. A named driver is covered to drive a car but expected to use it less than the main driver and therefore pays less insurance.

Gaming - repeatedly changing the information on an application form to see what combination results in the lowest quote. It is quite common for people to try and 'game' the system by selecting a different Occupation from the list, using alternative addresses and giving different answers on where the car is kept overnight to see how it affects the quote.

Ghost Brokers - professional fraudsters who provide false information and fake documents to help their 'clients' get cheaper insurance. Often the person looking for insurance is unaware of this and pays for a policy which is invalid. The ghost broker gains by charging a fee for the service.

The Impact of COVID

The shift to digital channels

With the forced closure of offices and commercial premises due to COVID, more and more insurance is now being bought online.

Online forms are ubiquitous in the insurance industry when capturing information for a quote. Unfortunately application forms are very easy to game and most of the data is unverified even after the policy is sold. With more insurance bought online, companies are likely to see an increase in application fraud.

Trust in car insurance companies has eroded

Average mileage has dropped considerably with restrictions on travel and people working from home. The volume of motor accidents in 2020/21 were much lower than previous years so insurers have had to pay out less in claims.

Some of these savings have been passed on to policyholders through refunds but many argue the refunds don't adequately reflect the savings per policy. While it is too early to measure the impact yet, a number of studies have found that people are more tolerant of insurance fraud when they feel they have been treated unfairly by their insurance company.

Delays in driving tests

The pandemic restrictions and lock downs of the last 2 years have caused long delays in getting a driving test. In the UK wait times were up to 10 months as recently as January.

This has meant young drivers are unable to sit driving tests and continue to pay higher car insurance. Ghost Brokers have begun actively targeting these learners through social media.


Insurance providers face a daunting task in trying to fight insurance fraud. Today they must rely on mainly unverified information when giving a quote or selling a policy. As we move to a more digital world, new ways to commit fraud will be found and therefore new ways to identify and prevent it are essential.