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The REAL Cost of Fronting

The increasing cost of car insurance, particularly for younger drivers, has led to a growing number of parents breaking the law by falsely declaring that they drive their car more often than their son or daughter does. This practice is know as “fronting”.

“Fronting” usually occurs when a lower-risk driver (usually older) insures a vehicle in their name even though the vehicle will be primarily driven by a higher-risk driver (usually a young driver).

This can have serious financial and legal implications if detected by the insurance company.

Duty of Disclosure

Both the policyholder and the Insurer each have a duty to disclose all relevant Material Facts – although this will be changing in coming months.

A “Material Fact” would…

…“influence the judgement of a prudent insurer in fixing the premium or determining whether they will undertake the risk” .

In other words, this is any piece of information which could have a bearing on your insurance premium and terms.

Examples of Material Facts in relation to motor insurance include:

  • Claim / conviction history
  • Age/experience of the main user
  • Vehicle modifications
  • Overnight storage address

Failure to disclose a material fact could invalidate a policy, meaning that in the event of a claim the insurer may refuse to pay out, or could settle a third-party claim and attempt to recover the costs from the policyholder.

If the insurer did decline a claim for a “fronted” case, the young driver could be treated as uninsured, which would result in them being fined and receiving up to six penalty points (which triggers an automatic ban for new drivers). They would also face higher insurance costs for the next three to five years.

•• Ombudsman Backs Insurer ••

A recent example involved a mother who took out an insurance policy in her own name for her son’s car. During the initial phone call with the insurer she claimed that her son would “possibly drive the car once or twice a week”. However, when the car was damaged outside his University Halls of Residence she again phoned her insurer to advise of the claim and remarked that “…he’s been parking in the same spot every day for months”. The ombudsman concluded that the policyholder had knowingly misrepresented the situation and it considered this to be an example of fronting. It ruled in the insurer’s favour and upheld their decision to reject the claim.

If something serious happens – or an insurer decides to investigate in more detail – a guilty party will be found out.

Care about your future

Kerr Group Insurance is committed to providing Northern Ireland with insurance solutions which are valued by individuals, families and businesses.

For more information – get in touch. Contact Us, Today