‘Ghost brokers’ haunting the insurance market

• We’re urging consumers this Halloween to be vigilant as online fraudsters prey on victims, offering fake insurance deals.
• The rise in so-called ‘ghost brokers’ risks leaving people thousands of pounds out of pocket or facing severe unexpected circumstances. 

These fraudsters lurk in the shadows of social media and trick thousands of consumers a year into thinking they are signing legitimate insurance deals.

‘Ghost brokers’ act as insurance intermediaries – particularly for car and house insurance – offering policies that either do not exist or are invalid, leaving their victims without proper coverage and potentially facing serious consequences.

How do ghost brokers scam you?

1. Fake policies: The ghost broker fakes insurance documents, giving the impression that the buyer is insured when in fact they’re not as no policy exists.
2. Altered policies: They might take out a genuine policy in the driver’s name but with false information - such as incorrect addresses or driving history - to get a cheaper premium, but this voids the insurance if a claim is made.
3. Policy cancellations: They take out a real policy but cancel it shortly afterward, keeping the refund and leaving the buyer uninsured.

With an increasing number of young people using social media to search for car insurance deals, the risks of being tricked by a fraudulent broker are becoming more acute.

In cases we investigated, many drivers do not realise they’ve been scammed by a ghost broker until they make a claim to their insurer. They then face a whole host of expensive complications – from loss of money and cancelled policies, to being left uninsured, facing penalty fines, court cases, and even having markers added to their records. This in turn makes it difficult to obtain genuine insurance in the future.

Highlighting the issue today, Rachel Lam, Ombudsman Director, said: 

Falling victim to these ghost brokers can be a truly terrible experience and could impact your finances for years to come.

These so-called brokers lurk on social media channels and prey on people just trying to find a good deal for their insurance. It’s a stark reminder that if an offer seems too good to be true it often is.

Our message is simple – always check a broker’s credentials, beware of unrealistic deals, and if you believe you’ve fallen victim to a ghost scammer there may be someone you contact.

If you feel your insurer hasn’t dealt with you fairly, come to our free, easy-to-use service and we’ll see if we can help. Getting a fair answer doesn’t have to be frightening.”

To help drivers spot this dangerous scam, we are sharing some red flags to watch out for when buying car insurance: 

1. Unusually low prices: If the insurance quote seems significantly cheaper than market rates, be cautious.
2. Unprofessional contact methods: ghost brokers often operate via social media, messaging apps, or classified ads, rather than through official websites or emails.
3. Lack of accreditation: Legitimate brokers are registered with the Financial Conduct Authority (FCA). Always verify them using the FCA Register.
4. Request for cash or untraceable payments: Asking for cash or unusual payment methods is a warning sign.
5. Vague or suspicious policy documents: Check for errors, missing logos, or inconsistencies, and verify your insurance on the Motor Insurance Database (Navigate).

While we cannot investigate ghost brokers directly, as they’re unregulated, it can assist with disputes involving insurers or underwriters. Victims of such scams can report the incident to Action Fraud and get help from Victim Support.

In cases brought to us to be investigated, disputes often arise when victims of ghost brokers have their policies cancelled by the insurer due to misrepresentation.

To improve understanding of the issue, the we have provided some case studies based on real life examples of where things have gone wrong:

• A consumer complained to us after his insurer cancelled his motor policy and added a fraud marker on the insurance database. The consumer had unknowingly purchased the policy using a ghost broker (even though he paid the insurer direct) recommended by a friend. It was only after discovering this that the insurer cancelled the policy and added the marker. We acknowledged that the consumer was the victim of a ghost broker, and in this case didn’t think it was fair for the insurer to add the marker – which could affect future insurance premiums – without giving the consumer the option of cancelling the policy himself. As their action resulted in the consumer experiencing ongoing difficulties in getting new cover, we ordered the insurer to reverse its decision to cancel the policy.
• A consumer complained to us after her insurer voided her motor policy. They said she had deliberately misrepresented details to get a cheaper quote. The consumer didn’t agree with this and insisted she had provided accurate information. On investigating the case, we discovered the consumer had been the victim of a ghost broker, who tricked her into believing they were her insurer. We were also persuaded that the consumer provided the correct information to the ghost broker during their conversation to set up the policy – they just didn’t pass it on to the insurer, which is a common tactic. Given the circumstances, we felt it was unfair to hold the consumer responsible for the misrepresentation and ordered the insurer to put things right.

In other examples we found in the insurance provider’s favour: 

• A consumer complained to us after his motor insurance policy was cancelled, which he believed would increase his future premiums. The insurer cancelled the policy after discovering it was taken out from an IP address, involving a ghost broker, that had set up lots of different policies for different people. It also had multiple quotes for the consumer with different details before one was eventually used, however, it contained incorrect information. The consumer admitted he was introduced to the broker through Snapchat and failed to properly check the insurance documents. We agreed that the insurer was right to cancel the policy in line with its terms and conditions. 
• A consumer came to us after his insurer voided his motor policy from the start because of serious misrepresentations at the time of arranging the policy. The consumer had used a ghost broker who filled out the application form and lied about the consumer’s date of birth, the date he passed his driving test and more. The consumer didn’t think he should be blamed for this. After voiding the policy, the insurer refunded the premium paid and confirmed that had the correct information been included in the application, the policy would have cost a lot more. We didn’t think the insurer acted wrongly or unfairly in the circumstances; and as the information was clearly incorrect, they were entitled to void the policy.