Aviva Insurance has warned young drivers that taking out plans in their parents’ name whilst actually being the sole driver of the vehicle is an act of fraud.

The money-saving practice known as “fronting” is currently widespread throughout Ireland but it is now being blamed with pushing up premiums.

According to the Irish Independent, Aviva has sent its customers a warning that this activity is illegal and that the young drivers who are enjoying cheaper premiums by using their parents’ names (despite the fact they do not use the car) may not in fact be covered.

Aviva wrote that making a “false declaration by saying that someone is an occasional driver as opposed to the main driver” was fraud and could result in a criminal conviction. It also stated that many people involved in fronting do not realise that it’s not only against the law, but also puts lives at risk.

The insurer said increasing levels of fraudulent claims and fronting is a factor in rising premium costs.

It cautioned:

"If these drivers are involved in an accident and insurers investigate and find out that the named driver is actually the main user, the insurance policy will be deemed invalid.

"It may result in a conviction, fine or both the policyholder and the driver of the vehicle could be convicted, fined and potentially banned from driving."

Aviva's leaflet comes as the Competition and Consumer Protection Commission (CCPC) investigates the sector's pricing and whether there have been “breaches of competition law” by insurers in the market.

CCPC chairperson Isolde Goggin has already stated that “statements by senior industry players have raised serious suspicion” over their dealings.

Charlie Weston, personal finance editor of the Irish Independent, recently told Newstalk that the insurers need to shoulder the blame. 

He said:

"They were competing with each other at a level where they couldn't make money, the rules changed... New solvency rules came in, affecting their reserves. They got caught on that one.

“Investments are on the floor – they don't make any money out of investments – and they were underpricing and under reserving.

“So they've been caught now. This at least puts the heat on them.  It'll be difficult for them now to put through massive increases next year when they're being investigated by the competition authority.”