Motor insurance fraud

24 February 2009

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Economic uncertainty, along with rising fuel and living costs, is being blamed for a rise in fleet car fraud. Insurers are warning that instances of fuel fraud and insurance fronting are on the increase so, as an employer, you should know how to spot the signs. Plus, we tell you what constitutes insurance fraud and why you should avoid it all costs.

Fronting

Fronting is on the rise in commercial motor insurance. It involves company owners or directors insuring drivers not connected with company business on its fleet policies to save money. Typically, this may be children who have not earned their own "no claims" discount, or spouses with a high claims history.

This type of misrepresentation constitutes insurance fraud and can invalidate the company's motor insurance, leaving the business to pay for any damage to its vehicle. Furthermore, if the driver is involved in an accident involving another party, whilst the insurer is legally obliged to meet any third party liability costs under road traffic legislation, they can look to recover these payments from the policyholder.

Fuel fraud

The high cost of fuel is also leading to an increase in company vehicle drivers attempting to defraud their employers by submitting false fuel expenses.

A common type of fuel fraud is via pay-and-reclaim systems, when receipts are collected to reimburse drivers fuel costs. Less honest employees might be tempted to submit their personal fuel receipts alongside their business ones.

Despite many companies giving employees fuel cards and using fleet management software to track usage, systems are open to abuse. There is evidence that some unscrupulous drivers have been partially filling up their company car and then filling up a second car at the same pump, the fuel card shows them as one purchase.

How to protect your business from fleet fraud

To avoid any insurance cover problems, fleet managers should be aware of who owns and drives all vehicles insured under the company fleet policy.
Fleet managers should review company policy regarding who can drive company vehicles for social, domestic and pleasure use, including the age of drivers, and ensure adequate controls are in place, including regular checks of driver licences.
Audit fuel records regularly, comparing claimed mileage, odometer readings, cost and expected use by employees.
Ensure that the company policy regarding the proper use of fleet vehicles and expense claims is circulated regularly and that all employees are familiar with it.

About the author

This article was provided by Jones Taylor Steven Limited, independent insurance brokers, based in Manchester, who have been trading for over thirty five years and who have expertise in all aspects of commercial insurances, particularly haulage, warehousing, marine transit and insurance for freight forwarders.

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