So called ‘Ghost Brokers’ have been hitting the news headlines recently with the arrest of 27 people on suspected car insurance fraud charges and the sentencing of two who offered cheap young drivers cover from false websites.
The practice of selling insurance, taking the premium money and not placing the cover has been going on since insurance was invented and is embedded in our criminal culture. Indeed even the BBC’s Eastenders covered the subject a couple of years ago with Max Branning pocketing the money he’d taken in premiums.
However, the advent of the Internet has allowed the frauds to be taken to new levels of sophistication and deceit.
Fraud is not a victimless crime and car insurance fraud damages not just the unsuspecting driver who may be prosecuted for not having genuine cover or face a huge damages bill for an accident, but bona-fide insurance brokers such as ourselves who rely on the Internet and social media to promote our products and reach our customers. Ultimately Society as a whole must pay for the cost of investigating and prosecuting such fraud.
What is a Ghost Broker operational setup?
For all intents and purposes Ghost Brokers set themselves up and market themselves in every way a real insurance broker would. It is this commonality within multiple distribution channels, that deceives the public.
Typically a ghost broker operation consists of a website with a telephone number, a newspaper advert with a telephone number and website address, or search engine ads and social media links to the website. A recently convicted pair used ‘paid for’ Google ads to promote their fraud.
All transactions are carried out by telephone. Some of the more sophisticated fraudsters even set up fake call-centres, operating out of flats or rented premises, to process the ‘policies’ and collect the premiums.
To avoid immediate detection customers are sent false documentation or cover that has been bought by the ghost broker purporting to be the proposer through a genuine company but using false or inaccurate details.
The Proposition and Potential Fraud Targets
Ghost Brokers usually target specialist groups of driver, especially those who fall into higher risk groups and face high premiums in order to drive. Those most at risk of falling prey to the scams are most often groups of people with little knowledge of the insurance market.
These targets include first time drivers, young drivers, convicted drivers and sickeningly drivers with medical conditions. Foreign nationals living in the UK are particularly at risk with many of these groups targeted by native speaking adverts and bogus staff.
The proposition is always a large discount on car insurance and cheap cover.
How to spot Ghost Brokers and avoid being duped
If you come across a website such as the above which has the appearance and functionality of many real providers, how can you tell if this is a genuine company?
No matter whether your suspicions are aroused by a dodgy looking phone number or a lack of online quoting, there is something that is missing from all Ghost broker websites, and that is a genuine FCA authorisation and regulation number.
In the UK no-one is allowed to promote, advise, introduce or act as an intermediary for the sale of any type of insurance unless they are authorised and regulated by the Financial Conduct Authority.
To get this authorisation car insurance brokers must demonstrate that they are suitably solvent, knowledgeable, qualified and hold professional indemnity insurance and abide to the rules, standards and regulations of competence laid down by the FCA. The authorisation costs brokers and intermediaries such as ourselves thousands of pounds in annual fees each year and in the cost of compliance.
All authorised websites should display their authorisation number (ours is displayed on the footer of every page). This number can be easily checked against the register of providers at the FCA which also gives details about the type of company authorised to offer car insurance services.
Check the FCA Register to ensure they are authorised. If a firm does not appear on the Register but claims it does, contact the FCA Consumer Helpline on 0800 111 6768.
If you deal with an unauthorised firm you will not be covered by the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) if things go wrong.
What to do if you suspect you may have bought fraudulent cover
If you think you may have fallen for a scam, the first thing to do is to check that your car registration appears on the Motor Insurance database (MID).
If it is not on the MID you may have been issued with false documents.
Even if you car does appear on the MID you should carefully check the insurance documentation in your possession against the information you provided to the broker. If the information is inaccurate contact the underwriting company direct as you will not be covered if you make a claim.
If you think you have been duped by a ghost broker you should contact the Police, FCA complaints department Helpline on 0800 111 6768, and the Insurance fraud bureau via www.insurancefraudbureau.org/
Why use a broker Anyway?
Genuine specialist car insurance brokers offer valuable alternative insurance propositions to the big brands and can often offer much cheaper cover than even the large comparison websites. Brokers also offer invaluable qualified advice on types of cover and policies available and unlike comparison sites which just want a commission for introductions, they are there to assist the policyholder throughout the lifetime of the policy for claims and changes to cover.