Fronting For Your Children
There is an increasing and worrying trend of parents buying car insurance policies that are really for their children, using their name so that they get insurance at a lower premium, because of their age and driving experience. This is known to insurers as “fronting”.
Insurance companies price their insurance according to the likelihood that they will have to pay a claim. For car insurance policies this means that the insurer wants to know who is driving and what car is being driven for what purpose. Insurers use statistics from large populations that show that young drivers have more accidents than older people, people who make claims tend to go on making claims and people who break the law and earn demerit points also make more claims. So a safe driver from an insurer’s perspective is someone driving a “sensible” car, without demerit points, who is over 25 years of age and who drives for pleasure or commuting, not for work.
It follows that the premium for a young inexperienced driver is likely to be higher than for that person’s parents. Insurers like Directasia.com offer low prices to safe drivers but in order to keep prices down they have to be sure that the declarations about the driver are correct.
If a policyholder makes a claim and the insurer discovers that the policy was actually a “front”, disguising the fact that the main driver was an inexperienced driver, then the insurer can deny the claim. This can end up being very costly to the policyholder. They have benefited from low premiums with a false declaration and cannot expect to get the same treatment as law-abiding customers who make honest policy declarations and pay the appropriate premium.
The cost of fronting will likely be many, many times the saving made on the insurance cost. It is simply not worth it on a personal level. It is also very anti-social behaviour as it puts up the cost of insurance to all drivers.
Saving hundreds of dollars can cost you tens of thousands. Make honest and full disclosures to your insurer and then expect fair treatment in return for your fair behaviour.