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13 Jan 2012
Lois Avery Lois Avery

Ghost brokering: Could your car insurance policy be fake?


Don’t get caught out by a fake insurance policy. We investigate a fraud phenomenon known as ghost brokering and explain how to avoid becoming a victim.

Red car on coins

You approach a local, independent, insurance broker because you've seen an advert promising a better deal on your car insurance.

You give them your details, they give you a quote and, after you've handed over your money, the documents arrive.

But they’re fake.

This is known as ghost brokering. These firms act as middle-men, and they contact real insurance providers on behalf of customers to arrange cover.

However, they fraudulently change the customer’s details to keep the premiums artificially low, leaving you out of pocket with an invalid car insurance premium.

Thousands of drivers affected

In 2011, Action Fraud found that up to 20,000 motorists could be driving uninsured after responding to cheap insurance offers advertised online or via small ads.

But the Association of British Insurers (ABI) believes the problem could be much bigger.

Malcolm Tarling from the ABI said:

“We have for some time been investigating the growth in these illegal insurance advisers who basically purport to arrange motor insurance but take the money off innocent motorists and pocket it.

"The result is the motorist thinks they are covered but are in fact driving without insurance and hence illegally.”

According to the ABI, illegal insurance advisers often target:

  • Vulnerable groups, such as students, because they’re attracted by the promise of lower premiums.

  • Overseas workers who are often in relatively low paid employment and unfamiliar with insurance in the UK and possible language issues.

  • Poorer members of society generally.

How to spot a ghost broker

Person in handcuffs

Advisers posing as brokers trade through websites, newsagents, pubs, clubs and bars, outside supermarkets and flyers placed on the windscreens of parked vehicles.

A common scam they use is to take a cash payment from the customer, but then use stolen credit card details to pay the premium, or use bank details of an innocent third party to pay by direct debit.

The ABI is investigating the problem further and say it could prove to have tens of thousands of victims.

Tarling added:“Now you and I would not buy insurance in this way, but many would and do.

"While we do not know exactly how many motorists may have been duped in this way we have estimated the scale of the problem could run into tens of thousands.”

Examples of ghost brokering fraud

Paid for in stolen bank details

An insurer identified a large number of motor insurance policies taken out at three East London addresses for which premiums were paid in cash or they were paid for using stolen or fraudulent payment details.

The scam spread to 1,800 illegal policies across East London. An individual was caught and received a six-month prison sentence.

Using false information

Two foreign students targeted other overseas students.

They entered false details on an insurer’s website, taking cash payments from their innocent victims then paying for the policies with stolen or fraudulent payments.

Over 2,500 fraudulent policies were taken out this way. The two students were arrested and charged.

Issuing fake documents

Two brothers operated illegally advertising online, in newsagent windows and at car repairers. They arranged over 1,000 insurance policies using false insurance documents.

They were arrested and received prison sentences.

ABI advice to the public

  • If someone approaches you or you see an offer of insurance that seems too good to be true then it probably is.

  • Avoid buying your insurance from any of the means mentioned above.

  • If you are unsure if an insurance intermediary is legitimate then check with the Financial Services Authority that they are authorised and registered with the FSA.

  • When arranging motor insurance you should expect to receive: a certificate of motor insurance; a schedule of cover; and the policy document or a web address where it can be viewed or printed.


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