The insurance industry is built on trust - customers trust insurers to provide financial protection, while insurers trust customers to provide accurate information. However, the industry has become a lucrative target for fraudulent activity, by individuals seeking to manipulate applications for their benefit, and more widely by organized crime seeking to commit fraud at scale.
Among the various scams, ‘ghost broking’ has emerged as a particularly insidious and damaging form of insurance fraud. It preys on individuals seeking cheaper insurance deals, often leaving victims with invalid policies, financial losses, or even legal troubles.
What is Ghost Broking?
Ghost broking is a type of insurance fraud where scammers pose as legitimate insurance brokers to sell fake or invalid insurance policies. These ‘ghost brokers’ often attract customers by advertising heavily discounted deals on social media, appealing to individuals who may be price-sensitive, unfamiliar with the insurance process, or unaware of how to verify a broker’s legitimacy.
According to the latest figures from the Insurance Fraud Bureau (IFB), the number of people who became victims of ghost brokers on social media increased by 6% in the UK last year.
Ghost brokers operate using various methods:
Falsifying applications: The ghost broker submits fake details to obtain a cheaper policy, such as altering an applicant’s address or age, which invalidates the policy.
Forging documents: They create entirely fake insurance certificates that look authentic but have no validity.
Acting as intermediaries: Ghost brokers claim to negotiate with insurers on behalf of customers, charging a fee but never actually providing coverage.
What ghost broking looks like
Social media scams
Often advertising their services on platforms like Facebook, Instagram, and WhatsApp, ghost brokers target young drivers. While one in five 18-24 year olds now use social media to search for car insurance, a recent YouGov survey revealed that only one in ten people are familiar with ghost broking.
In one notable case in the UK, a fraudster used Instagram to sell fake car insurance policies, leaving dozens of unsuspecting victims uncovered and liable for thousands of pounds in damages after accidents. In other instances, victims can have their identity stolen too.
Fake policies in the post
A ghost broker in the UK was recently convicted for sending counterfeit car insurance policies to victims, earning over £60,000 before being caught. Many victims only discovered the scam when stopped by police or after trying to file a claim.
Impact of ghost broking
Ghost broking is not a victimless crime; it has significant consequences for individuals, insurers, and the broader market.
Impact on victims
Victims of ghost broking often face severe consequences:
Uninsured vehicles: Many victims unknowingly drive without valid insurance, leading to fines, penalty points on their license, and vehicle seizure.
Financial loss: Victims pay for policies that don’t exist and may incur further costs from accidents or legal repercussions.
Emotional distress: Discovering you’ve been scammed can lead to anxiety and mistrust in legitimate insurance providers.
Impact on the Insurance industry
Ghost broking contributes significantly to the rising cost of insurance fraud:
Increased premiums
According to the Association of British Insurers (ABI), insurance fraud costs the UK industry over £1.2 billion annually, adding an estimated £50 to the average policyholder's premium. Ghost broking forms a substantial part of this figure.
Strained resources
Insurers and law enforcement invest considerable resources in detecting and prosecuting ghost brokers, diverting attention from other critical tasks.
Detect ghost broking early
The ability to detect ghost broking at the application stage is crucial in preventing and mitigating the damage it causes - stopping fraudulent policies from being issued in the first place. Central to this is employing robust fraud detection systems that use behavioral analytics to detect key signals and provide red flags early.
At Pasabi, we take a holistic approach to data, analysing metadata from the user journey as well as the data submitted on the application. These signals are then fed into our network analysis to find connected accounts, uncovering insurance fraud rings alongside individual bad actors.
Early detection reduces insurers’ liabilities for referral fees to price comparison sites and also reduces time spent processing fake policies, and downstream claims losses from undetected fraud.
Stop claims fraud before it starts
If you’d like to find out how Pasabi can help detect ghost broking and other fraudulent activity speak to a member of our team today.
Photo by Daria Nepriakhina on Unsplash
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