The Insurance Fraud Bureau (IFB) has recently issued a warning to drivers to be vigilant against the risk of falling victim to a ghost broking scam. Particularly in the wake of the pandemic where financial concerns and a desire to save money may be heightened.
What is ghost broking?
Ghost broking is a type of insurance fraud. The fraudster (or ghost broker) will pretend to be a genuine insurance broker acting between an individual and legitimate insurance company to arrange the individual’s insurance. However, the ghost broker will provide the individual with fake, forged or invalid insurance policies.
This means the individual believes they have genuine insurance cover and carry on as if they are insured. But in reality, no valid insurance policy is in place.
This can have significant consequences when it comes to making an insurance claim, with claims made against invalid policies rejected by insurers.
Ghost broking typically involves car insurance policies.
Driving without valid car insurance is also against the law. So, if you are a victim of car insurance ghost broking there could be additional consequences.
There are a number of techniques that ghost broking uses:
- Forging entire insurance documents. Ultimately selling you a fake policy. The individual will be unaware and believe that they are in fact covered
- Altering the insureds details such as age, occupation, address or driving experience to significantly reduce the price of the policy. But the insurance will be invalid as the details are incorrect
- Setting up a genuine insurance policy and then cancelling it shortly after. The ghost broker then claims the refund for themselves and doesn’t inform the individual they no longer have insurance cover in place.
How do ghost brokers trick people?
Insurance can be expensive, and costs are rising so there is a clear market for fraud. Many people are looking to get the best deal possible and save money and this is what ghost broking will tap into to take advantage of people.
Figures from the City of London’s Insurance Fraud Enforcement Department (IFED) reported by Action Fraudsuggest that those most like to be targeted by ghost brokers are men aged between 20-29. Possibly linked to the high cost of insurance policies in this age bracket.
Keyways in which ghost brokers target individuals were found to be:
- Social media – particularly advertising on Facebook and Instagram.
- Adverts in magazines and newspapers
- Cold calling
- Being introduced by friends, family or work colleagues
Ghost brokers may also target money saving forums, student websites or even noticeboards. Anywhere they think they can take advantage of people looking to save money.
They will advertise and aim to convince that they can provide very cheap insurance deals. Usually offering unconvincing stories about the reasons that they are able to get significantly cheaper deals than you can access yourself.
Ghost brokers will typically provide a mobile number not a landline for you to reach them on or may try to encourage communication through messaging apps such as Whatsapp or Facebook messenger. They are encrypted so are harder to track. It is unlikely that they will have a business website or other valid contact details either. You should also be alert if a broker gets in touch with you, rather than you seeking them out.
Ghost broking penalties and points
It is illegal to drive without valid car insurance in place and if you are found to be driving without car insurance (even if you are unaware) there can be significant consequences.
Penalties for driving with a fake or invalid insurance policy are the same as driving without any insurance in place
- A fixed penalty of £300
- 6 penalty points on your driving licence
- Your car can be seized by the police
`You could also be liable for any damage caused to another vehicle as the result of an accident.
And you’ll also have to pay for a valid insurance policy in addition to the money paid out and lost on a fake policy from a ghost broker.
How to find a reputable broker?
Before working with an insurance broker, or any insurance company, it is important to carry out your own checks to ensure that they are genuine and reputable.
Luckily there are a number of resources that you can refer to:
- The Financial Conduct Authority (FCA) – the FCA regulate insurance brokers so a genuine broker will be registered with the FCA. You can check details on the Financial Services Register
- British Insurance Brokers Association (BIBA) – check that your broker is registered with BIBA before working with them
- When it comes to car insurance you can check the Motor Insurance Database to ensure that you do genuinely have insurance in place
If you have an instinct that something doesn’t seem right or feels too good to be true, then be cautious before going ahead. Carry out sufficient research so you are confident that you are dealing with a genuine broker and are not falling victim to a ghost broking scam.
Anthony Jones is an established insurance broker, founded in 1984. We are an independent broker and pride ourselves in the strong relationships we have built both with insurers and with our customers. We put the focus on our customers – you can trust us to get you the best value insurance for your needs. If you are reviewing your insurance or the insurance broker that you work with, get in touch with us today.