Consumers need to be more diligent to avoid Ghost Brokers scam which are leaving drivers in the UK, breaking the law with invalid insurance
Would you risk your driving licence and home by buying car insurance in the pub or from a small ad in your local shop? The obvious answer is no, but according to AXA, the insurer estimates that up to 20,000 motorists in the UK could be risking their licence, vehicle or home by driving on a fraudulent policy bought through ghost brokers.
Ghost brokers, are run by criminals who target vulnerable members of the public with offers of cheap car insurance through small-ads, over the telephone or in person in local pubs. Other tactics involve creating official looking websites that portray an image of respectability offering policies through legitimate UK insurers.
The number of ghost brokers successfully selling worthless car insurance is staggering. For example, AA Insurance fraud team during 2013, blocked more than 10 suspected ghost brokers from obtaining car insurance every day.
LV=, said it had identified more than 60 fraud rings so far and a growing number of innocent drivers have been in contact with the insurer to complain that they are receiving documents, payment requests and cancellation notices from LV= for policies they have not taken out.
The first scam used by ghost brokers involves a computer, a bit of cut and paste enabling the fraudsters to create a false insurance certificate by compiling a document based on a copy of a genuine insurance policy. This type of fraud is the most crude and easiest to spot as policyholders can check the motor insurance database – askMID.com – to see if their vehicle is on the database.
Ghost brokers often communicate with customers via free internet messaging on mobile phones, such as BlackBerry messaging and WhatsApp
The second scam involves the ghost broker taking out a genuine policy, but this time they falsify some of the policyholders information when applying for the policy. The ghost broker changes important information used to underwrite a policy, for example they register the policy at a different address, change the age of the policyholder or fail to mention any previous or pending driving convictions or accidents.
By altering crucial information the policyholder then benefits from lower premiums than they otherwise would not have got if they had gained a quote using genuine details. Even though the policy is real and active the policy is void because it was purchased fraudulently.
The third and final scam used by a broker is very simple. The ghost broker takes out a genuine insurance policy on behalf of a policyholder, but most importantly arranges for the certificate of insurance to be sent to the firm.
The fraudster does inform the insurer of the correct name and vehicle details so checks on the askMID.com website will show that their vehicle is insured. Believing you have insurance for the year is a big mistake because behind the scenes not long after the policy is taken out the broker cancels it. Once the policy is cancelled, and the broker has pocketed the refunded premium, the policyholder continues to drive around unaware they are not insured and their insurance policy document is worthless.
By altering crucial information the policyholder then benefits from lower premiums than they otherwise would have got if they had gained a quote using genuine details. Even though the policy is real and active the policy is void because it was purchased fraudulently.
Detective Superintendent Bob Wishart of the City of London police said: “Ghost broking is an emerging threat within the insurance fraud arena, costing the industry millions of pounds, leaving companies exposed and meaning thousands of people are unknowingly uninsured.
“This new criminality is particularly prevalent in motor insurance, with fraudsters looking to capitalise on what is a compulsory and sometimes costly product.”
Eric Galbraith, chief executive at BIBA, said: “This is an insurance scam which is being carried out by fraudsters. Forget about the gimmicky names, they are criminals and we are pleased that the police unit for insurance fraud will be tackling the issue.
“We will continue to promote the value of regulated insurance brokers and push the message that those carrying out these crimes are not part of our sector.
“Consumers should be aware that there are criminal elements trying to exploit specific communities and if in doubt they should check with the FSA or use a BIBA broker.”
It is always a good idea even if your vehicle is listed on the MID database you should contact your insurer to make sure that your policy is legitimate. Run through the policy with the insurer to ensure your personal details match the information held by your insurer to ensure you have not been sold a fraudulent policy.
How to avoid illegal insurance advisers
1. Check that your insurance adviser is on the Financial Services Register before you buy a policy from them
2. Check the broker is a member of the British Insurance Brokers Association (Biba)
3. If you have any concerns about your insurance policy, the first step should be to contact the insurer named on your policy directly
4. Ensure the insurance company has the correct details for you and your vehicle
5. Request copies of the policy documents from the insurer directly and where applicable confirm any premium payment plan.
6. Check that your vehicle is registered on the askMID.com website
7. Discounts are available from reputable brokers for paying premiums up front, including genuine comparison sites, but always use caution with any company insisting on paying up front. If the broker is not on any of the aforementioned registers walk away. Some brokers go the elaborate lengths of offering to accept payments by instalments to make the transaction seem more legit
8. Beware of adverts guaranteeing significantly lower premiums, or offering fixed-price insurance.
9. Avoid insurance policies sold via social networking sites, pubs, clubs and bars, newsagents and motor repair shops.
10. If the premium sounds to good to be true, it most likely is so walk away.
What’s the worst that can happen if you have used a ghost broker?
The first guarantee is you will lose any premiums paid and you also risk a criminal record.
Even though you will claim you are a victim you have still committed a motoring offence by driving a vehicle without insurance, or allowing it to be used by another driver without insurance.
The offence for being caught by the police for driving without insurance carries a fines of up to £5,000, up to eight penalty points on your licence and in some circumstances where a driver has existing points, an instant driving ban.
And finally, if the authorities suspect you were aware of or willingly participated in the scam, they authorities can seize your vehicle and arrest you for fraud.