The majority of drivers are ignorant of ghost brokering, even though over 55,000 fraudulent applications for auto insurance were submitted in the past year.
More than twice as many examples of social media fraud have been reported in the past year compared to the preceding 12 months, and experts are concerned that it may grow more popular as the cost of living continues to rise.
Victims of these frauds lose an average of about £2,000 and may face criminal charges; the number of reported incidents has more than doubled in the past year.
According to the Insurance Fraud Bureau (IFB), ghost brokers are “rife” on social media, leaving victims impoverished, without a vehicle, and at risk of criminal charges, while posing a serious cyber threat and costing the economy millions of dollars.
What exactly is a ghost broker?
A ghost broker is a fraudster who poses as a legitimate insurance broker on social media sites such as TikTok, Facebook, and Instagram to sell fraudulent auto insurance.
Typically, fraudsters acting as brokers sell policies to victims at a drastically discounted price, which is tempting to younger and more inexperienced drivers who pay the highest insurance premiums.
In the past 12 months, almost 55,000 fake vehicle insurance applications were submitted, according to the IFB’s most recent investigation, which was performed in conjunction with UK insurers and police.
Insurers together reported more than 21,000 policies that may be tied to the fraud last year, indicating that the number of cases is more than tripling each year.
According to annual statistics given by the Association of British Insurers, over £1 billion in fraudulent insurance applications are uncovered annually (ABI).
How does ghost broking work?
Ghost brokers purchase policies from legitimate insurance companies using fraudulent information, then modify the policies before offering them to customers at a discount.
It frequently involves faked insurance documents, but it can also entail selling real policies to victims with altered critical information, such as their address or claims history, so rendering the policy void.
The fraudulent policy documents will be altered and falsified to appear as if they were issued by an insurer to deceive drivers into believing they are legitimate.
Those who fall victim to the fraud will be uninsured and will thus suffer severe penalties.
What are the consequences of falling for a ghost brokering scam?
According to a recent survey by Which? the average ghost brokering scam cost people thousands of pounds in 2021, with the usual victim losing £1,950.
Because drivers who fall for the scam are unknowingly uninsured, they are subject to the same penalties as those who drive without insurance on purpose.
Driving without insurance incurs a least fixed penalty of £300 and six points, and can even end in court proceedings where infinite fines, a driving ban, and a criminal conviction are possible.
It may also result in the police seizing and possibly destroying your vehicle. To retrieve the vehicle, you must pay a minimum of £150 to get it released, in addition to purchasing appropriate insurance.
If you are involved in an accident without insurance, you may be responsible for covering the full cost of the other party’s injuries and property damage.
Ghost brokers also constitute a severe cyber hazard since they steal personal information to obtain policies under the identities of persons – such as older, more experienced drivers who typically have lower insurance – to forge and resell policies in other people’s names.
The rising cost of living could lead to an increase in ghost brokering.
Britain is in the throes of a cost-of-living crisis, as energy costs continue to increase, food prices continue to rise, and mortgage rates continue to climb.
And according to the IFB, this is a prime moment for ghost brokers to strike, since they target those in need of cost savings.
The bureau is especially concerned about this deception because so few people are aware of its existence, and more than four out of five drivers may fall for social media advertisements.
IFB-commissioned YouGov research reveals that barely one in six individuals (17%) are currently aware of ghost brokering frauds, despite their presence on major networks like Facebook and Instagram.
The IFB cautioned, “As the expense of living climbs, it is feared that the number of victims of ghost brokering will increase rapidly unless more is done to educate the public about the indicators of this fraud.”
Today (3 October) started an awareness campaign to educate young drivers who, according to its investigation, are most prone to fall victim to the scam to advise them on how to recognize the symptoms of a phony motor insurance deal and how serious the repercussions might be.
Director of the IFB Ursula Jallow stated that ghost brokering frauds are now “rife” on social media.
Not only can ghost brokers leave victims impoverished, without a vehicle, and at risk of criminal charges, but these fraudsters also pose a cyber threat and cost the economy millions of dollars.
Jallow stated, “In these difficult economic times, it is vital for drivers to recognize the indications of ghost broking frauds” and added, “anyone with evidence of an insurance scam should report it immediately.”
Detective Chief Inspector Tom Hill of the City of London Police’s Insurance Fraud Enforcement Department (IFED) stated, “While we continue to disrupt ghost brokers by shutting off their online resources, we warn the general public to be on the lookout for the indicators of a fraudulent policy.
‘As we move into a difficult economic climate, a cheap deal may be more alluring than ever, but a fraudulent policy will end up costing you far more in the long term.
Social media sites not only provide fraudsters with a front to hide behind but also a vast audience of potential victims to target.
‘Over the past year, every case of Ghost Broking to Action Fraud has been cyber-enabled, indicating that online bargains that seem too good to be true should be approached with caution. These reports have resulted in losses of £1.5 million.
We hope that this campaign will remind individuals to conduct the necessary checks before parting with their money.
The increase in discovered application fraud is a result of insurers’ attempts to combat it.
How to recognize ghost brokering fraud
Although vehicle insurance is charged based on the risk of the information provided by the insured, ghost brokers typically offer upfront set costs without any type of evaluation.
However, in an attempt to appear more legitimate, other con artists would provide fake quotes to make victims believe the insurance policy is personalized to them, but the price offered will be absurdly low.
A further indicator of ghost brokering is pressing potential victims to engage with the fraudsters over end-to-end encrypted messaging applications such as WhatsApp. This is done to conceal unlawful transactions.
In addition, they may boast that the insurance coverage is legal since it shows on the Motor Insurance Database (MID), even though they obtained the policy using fake information, rendering it invalid.
How do I detect a ghost broker?
The IFB asserts that there are methods for determining if an online broker is legitimate. This requires searching for them in multiple member databases:
• All legitimate insurance brokers are British Insurance Brokers Association-registered (BIBA).
• Insurance advisors are Financial Conduct Authority-registered (FCA).
• Motor insurers are Motor Insurers’ Bureau members (MIB).
Why don’t social media networks prevent ghost brokers?
As part of an investigation into ghost broking conducted earlier this year by Which?, six identities were created on TikTok, Facebook, and Instagram under the guise of being auto insurance brokers to assess how social media platforms screen unregulated insurance middlemen.
Two Facebook profiles and one Instagram profile related to an email including the phrase “ghostbrokerscammer” were deleted within a few days.
However, the second Instagram profile and the two TikTok pages remained online for 35 days before Which? removed them.
Experts argue that social media sites should be compelled to implement more stringent safeguards to protect users from bogus pages providing financial services.
Jenny Ross, editor-in-chief of Which? Money urged the government to alter the Online Safety Bill so that the definition of fraud does not permit con artists to evade detection.
She stated, “Ghost brokering is a particularly heinous form of fraud in which con artists operate covertly and prey on folks who feel locked out of or confused by the auto insurance market.”
“Social media companies must do much more to prevent vehicle insurance scammers from infiltrating their platforms and damaging consumers, and they must fix these issues before the passage of the Online Safety Bill.
The Online Safety Act should mandate that platforms combat this type of bogus content.
“The government must ensure that this occurs by modifying the Bill so that its definition of fraud does not allow certain con artists to slide through the cracks, and by ensuring that Ofcom is prepared to enforce these new rules when they go into effect.”
A representative of TikTok reacted to the Which? study. They stated, “Our Community Guidelines make it clear that we do not accept any type of fraud or scams on TikTok, and we will continue to remove this type of content aggressively.”
Reporting insurance fraud
Anyone who believes they have evidence of insurance fraud, such as ghost broking, can report it to the insurance industry online via the IFB’s Cheatline website or its phone line (enabled by CrimeStoppers) at 0800 422 0421.
