Many people make mistakes or hide the truth when applying for insurance, new research shows. But these errors can prove expensive in the long-run.
A fifth of Brits admit they have lied to their insurer when applying for cover, new research shows.
Figures from Zurich indicate that 20% of customers have, whether by accident or design, failed to tell the whole truth when buying home, car, medical or other types of insurance.
Seeking to cut costs
One in 10 of the people the company interviewed admitted deliberately being economical with the truth in order to get a cheaper premium or because they were afraid of being turned down for cover.
Zurich spokesman Phil Ost said: "It’s really encouraging that most people don't feel it’s acceptable to lie to save money and honesty really is the best policy when it comes to things like insurance."
But Ost added: "The consequences of being found out can be severe and maybe invalidate a policy and potentially result in claims not being paid."
Zurich also found that a fifth of Brits had lied to their employer or a potential employer, while one in nine admit to lying about their weight.
Fraud vs white lies
Dr Patrick Fagan is lecturer in consumer behaviour at Goldsmiths University in London.
He said the research showed many people don’t appreciate the difference between a white lie, told perhaps to spare someone’s feelings, and being untruthful with an insurer or employer.
"I think we’d all agree that a little frugality with the truth to avoid upsetting someone is fine, but it’s interesting to see that there are still a sizeable group of people who’d be dishonest in more serious and formal situations," Fagan said.
Gemma Stanbury, head of car insurance at Confused.com, says that there are some common mistakes that people make when applying for motor cover in particular.
- Come clean about previous claims.
"People may not accurately check instances of claims or convictions," Stanbury said. "Insurers typically require details from the previous five years.
"There is also a common misunderstanding of what is a fault or non-fault claim.
"This doesn't refer to what people generally associate it with in terms of blame, but actually which insurance company paid out."
For example, Stanbury added, if your car is scratched in a car park while you're not there, in terms of blame it isn't really your fault.
"But as there is no other insurance company to claim recover the money from and your insurer had to pay for it, it will be recorded as a fault claim.
"In addition, people don't always realise that they have to declare non-fault claims."
- Don’t pretend to be the main driver.
"Some people think it's acceptable to buy insurance for their child, listing them as an additional driver as opposed to the main driver," Stanbury said.
This strategy, known as fronting, may result in lower premiums – but insurers consider it fraud.
"The person who drives the car the most often MUST be the main driver and additional drivers should only be added if they drive the car occasionally."
- Using your car for commuting and work.
This is another area where confusion is common, Stanbury said.
"Registering your policy as 'social and commuting' only covers you to commute to one place of work, whereas if you occasionally work from a different office you would need to choose 'Business Class 1' on your application."
Stanbury added: "If you drive to a train station daily, before commuting to work you would still need a social and commuting policy because you will still be on the road in busy commuting hours."
The consequences of mistakes such as these can be severe.
"If you are found out the insurer can simply refuse to pay out on a claim or, depending on the circumstances, could reduce the payout," Stanbury warned.
"Take for example someone who had a premium of £90 and didn't disclose a conviction which would have raised their premium by £10.
"The insurer may choose to pay out only 90% of any subsequent claim."