AA Insurance says that its own fraud team blocks up to a dozen attempts to obtain car insurance by suspected ‘ghost brokers’ – criminals who sell ‘cheap’ fraudulent car insurance policies – every day.
Simon Douglas, director of AA Insurance, has welcomed a new industry initiative to raise public awareness of the phenomenon, including an animated video warning motorists, especially young drivers, about being ripped off by fraudsters selling fake car insurance.
He said:
“At a time when car insurance has become fiercely competitive, this is a very nasty type of insurance scam that fleeces vulnerable individuals and leaves them with useless car insurance. Ghost brokers tend to be IT literate and understand the insurance industry well. Their scams are sophisticated and can be difficult to identify but insurers, including the AA, are making significant strides to stop them.
“No one knows how many policies that appear legitimate are ghosted. When they do come to light, the ‘broker’ will have disappeared into thin air. Their customers are left with insurance cover that is no more than an apparition. Often the victims are landed with convictions for uninsured driving and their cars confiscated by police.”
Ghost brokers typically advertise cheap, no-quibble insurance on social websites or forums where particular groups are targeted. They typically include hard-up students, drivers with convictions, drivers newly arrived from overseas or ethnic groups for whom English isn’t the first language.
Well organised scams may even run their own websites. Only last month a sophisticated ghost broking network run by two criminals was smashed after taking £680,000 for worthless policies sold at 15% below the cheapest offered elsewhere.
Policies are typically bought by ghost brokers from legitimate providers but with altered details and false contact information for the customer. They may be paid for using false or stolen credit or debit cards, sometimes issued by overseas banks, while the buyer may be asked to pay cash.
Mr Douglas points out:
“Common tactics include guarantees to undercut any policy by a significant percentage; fixed-price policies through a reputable company such as the AA; mobile telephone contact numbers or an unwillingness to provide contact details for the insurance company with whom the business is being placed. If a policy is significantly cheaper than polices available elsewhere, or direct from the insurer’s website, it is probably not legitimate.”
Although they will initially appear on the industry’s Motor Insurance Database, phantom policies usually come to light quickly and are cancelled, when they will also be taken off the MID.
Mr Douglas says that the industry ‘ghost busters’ are getting better at identifying criminals but the challenge for the industry is stopping the ghost brokers before transactions are completed.
“For instance, the AA has invested heavily in sophisticated technology to stop the spooks before the damage is done and runs a dedicated fraud team to stop potential ghost transactions. We also run a database of thousands of fraudulent attempts to buy insurance and share information with the police as well as other insurers and the banks. The industry is working flat-out to spread the net as widely as possible.”
The AA is a member of the Insurance Fraud Bureau (IFB), Insurance Fraud Investigators’ Group and co-operates with the police Insurance Fraud Enforcement Unit.
Mr Douglas also acknowledges that buyers may suspect that their policy may not be legitimate but say nothing so they can benefit from a lower premium.
“This is a dark world riddled with blind alleys. Ghost brokers, telephone numbers and websites appear, do their damage and then vanish, making it difficult to identify the criminals. But we are getting better at finding our way around and the insurance industry is determined to exorcise the insurance ghosts for good which ultimately, will help lead to lower premiums for everyone.”
