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This article originally appeared in FOIL's 'The Voice', August 2024.
Ghost broking is a well publicised issue amongst insurers and brokers, most often associated with motor insurance policies.
Ghost brokers are not characters in a scary campfire story – they are fraudsters walking among us, who set out to sell cheap insurance deals where the policies either don’t exist at all or aren’t valid. Either way, the end result is that the consumer will not be provided with any form of legally valid insurance. Over the past few years, ghost brokers have been associated with targeting unsuspecting victims through social media and scam advertising.
Ghost broking in the motor insurance market
A ghost broker may present himself as a representative for a well known insurance company and will tempt his victim with the promise of cheaper car insurance.
Unlike a staged or contrived accident, the driver is often the victim. Not only is the driver out of pocket, but they can face criminal charges including driving without insurance, a fine or licence points.
Consumers and insurance companies are equally impacted by this type of fraud, with the insurance company forced to spend additional funds in investigation and defence and the consumer potentially facing uninsured losses and their premiums subsequently impacted.
Unsuspecting drivers are targeted and offered cheap car insurance deals and issued with what appear to be legitimate policy documents.
Young people who typically receive higher premiums than older drivers and those who do not speak English are particularly prone to target by a ghost broker. Elderly and less tech-savvy drivers may also be at increased risk.
In all the cases, the policy documents provided by a ghost broker are not worth the paper they are printed on.
Some scary stats
Major insurers have highlighted the growing risks of ghost broking. In November 2022, Aviva confirmed that ghost broking made up 15% of all policy fraud, whilst Insurance Age have confirmed a 143% rise in ghost broking referrals to the Insurance Fraud Enforcement Department of the City of London Police, measured year-on-year between 2021 to 2022.
The ghost broking issue remains prevalent in 2024 with the City of London Police’s Insurance Fraud Enforcement Department serving nine cease and desist notices in February this year. This has resulted in 438 arrests, and asset seizures of circa £19 million.
Put simply, ghost broking is a risk to which insurers, policyholders and the general public alike must be alive.
Avoiding a run in with a ghost broker - advice to policyholders
- As with all things, if something seems too good to be true, it usually is;
- Beware of brokers using only messaging applications, emails or mobile telephone numbers to contact you. A ghost broker will not want to be traced;
- Ghost brokers will lurk on money savings websites or market saving websites;
- Do not get your insurance from people on social media, cold calling or from introductions by others alone;
- Do not take insurance from a business that is not regulated.
Apart from increased online regulation, another bow in the arsenal will be further and increased education of the public at large. A YouGov survey commissioned by the Insurance Fraud Bureau confirmed that only 17% of people have heard of ghost broking. That is a staggeringly low number. Insurers can and should look to increase investment to ensure that the general public and their policyholders are aware of the ghost broking problem.
The role of Artificial Intelligence (AI)
Looking ahead, rapid developments in AI are likely to increase instances of ghost broking, not least because the sophistication by which fraudsters dupe innocent members of the public will improve. Whilst it seems an
insurmountable hurdle to tackle the ghost broking problem, hope is not lost. The Online Safety Act 2023 received Royal Assent on 26 October 2023. By virtue of sections 38 and 39, providers of online content owe a duty to ensure that fraudulent content is swiftly removed, failing which providers could be liable for substantial fines.
Apart from increased online regulation, another bow in the arsenal will be further and increased education of the public at large. A YouGov survey commissioned by the Insurance Fraud Bureau confirmed that only 17% of people have heard of ghost broking. That is a staggeringly low number. Insurers can and should look to increase investment to ensure that the general public and their policyholders are aware of the ghost broking problem.
Insurance and reinsurance
United Kingdom