Insurance fraud costs companies millions of pounds each year – and some scams are catching out innocent members of the public.
This week, the City of London Police warned of the dangers of ‘ghost broking’ – buying fake car insurance from fraudsters as a means of securing ultra-cheap cover. This type of fraud has caused hundreds of thousands of pounds in losses in the past three years.
So, could you spot a car insurance crime in the making?
Here, we outline what to look out for, how to avoid becoming a victim of insurance fraud and what to do if you are unfortunate enough to find yourself involved.
What is ‘ghost broking’?
Ghost brokers, also known as ‘illegal intermediaries’, sell fraudulent insurance policies, most commonly car insurance.
The City of London’s Insurance Fraud Enforcement Department (IFED) has recently warned that scams like this are on the rise.
Between November 2014 and October 2017, Action Fraud received more than 850 reports linked to ghost broking, with a total reported loss of £631,000 – an average of £769 per victim.
Typically, salesmen offer cheap deals, often targeting young people who are likely to pay the most for their insurance. The victim hands over the money, and receives seemingly genuinely insurance documents, leading them to believe their vehicle is insured.
But usually, the fraudsters have either:
- bought genuine policies from legitimate insurance companies using false information, then doctored the documents
- made totally fake policy documents with a logo of a legitimate company
- taken out a legitimate policy to provide you the documents, then canceled it shortly afterwards.
Many people don’t find out that their policy is fraudulent until they are stopped by the police, or when they try to make an insurance claim.
The penalties can be severe. Driving under a fraudulent policy may result in:
- Your insurance being invalid, meaning you have been driving illegally.
- Incurring a fine and six points being put on your driving licence.
- Being unable to make insurance claims.
- Having your vehicle seized and paying a fine to release it.
- Having to pay costs if you were in an accident and found to be at fault.
- Having to buy another genuine policy.
How to spot a ghost broker
The IFED has warned that many ghost brokers are active on social media, running fake advertisements on Facebook, Instagram, Snapchat money-saving forums, university notice boards and marketplace websites.
There have also been instances of fake advertisements in pubs, clubs and bars, in newsagents and motor repair shops.
You should be wary of brokers who provide mobile numbers or Gmail, Hotmail, Yahoo or Outlook email accounts as their primary form of contact, as this could indicate that they are not working for a legitimate company.
Scammers have also been reported to use apps like Whatsapp to communicate, as this makes them more difficult to trace.
You should also trust your instincts if a deal seems too-good-to-be true – such as a quote for car insurance for just £100 a year.
How can I check if my car insurance is legitimate?
Insurance brokers should be regulated by the Financial Conduct Authority and the Prudential Regulation Authority (PRA).
The Financial Services Register lists details of all of the firms, individuals and other bodies that are currently regulated by the PRA. Check the register, and only trust those who have been authorised or approved.
You can also check if your policy is listed on the Motor Insurers’ Bureau’s Motor Insurance Database. This records the policy details of all vehicles insured in the UK – if your vehicle is not listed, your policy is not legitimate.
If this is the case, you should contact your insurer to check whether your personal details match the information on their records.
If they don’t have your details, it may mean you have been sold a fraudulent policy. You should report the company or individual you bought it from to Action Fraud either online, or by calling 0300 123 2040.
- Find out more: Car insurance company reviews. Which? has reviewed and rated 31 car insurers’ standard car insurance policies, so you can find out the best offer for you.
‘Cash for crash’ fraud
‘Cash for crash’ describes fraudsters – often acting as a group – engineering a situation where an innocent motorist is forced into having a collision.
When a car crashes into another from behind, the driver at the back is usually found at fault, due to rule 126 of the Highway Code stating that you should ‘leave enough space between you and the vehicle in front’.
As such, criminals will put you in a situation where you’re forced to crash – for instance, by stopping suddenly or distracting your attention.
The aim is to claim compensation payments such as injury damage, loss of earnings, hire vehicles, recovery and storage, as well as claims for bogus passengers. The Insurance Fraud Bureau (IFB) states that cash for crash scams cost insurers around £340m a year.
The map below shows the top 30 UK district postcodes where incidences of cash for crash fraud is most prevalent, according to the IFB.
If you are targeted, and found to be ‘at fault’, you may have to pay the excess, lose your no-claims discount, and see your premiums soar.
How to avoid being a victim of cash for crash fraud
Commercial vehicles are targeted most often, as the scammers believe companies will be less inclined to refute insurance claims than individuals.
Other motorists sought out by criminals include those who seem unlikely to cause a fuss or who might be expected to have comprehensive insurance – including older people or mothers with children in the car.
The Insurance Fraud Enforcement Department (IFED) has published several tips for avoiding being the victim of a ‘cash for crash’ staged car accident.
- Keep a safe distance when driving, reducing your risk of running into the back of the car in front.
- Beware of tailgaters: fraudsters sometimes tailgate a driver to distract them. The car in front of the driver, driven by a co-conspirator, will suddenly brake, forcing the driver to collide.
- Look out for cars with broken brake lights: it can be a sign of someone looking to stage an accident, as other drivers won’t be aware if they suddenly brake.
- Take care at roundabouts and in congestion: the confusion and stop-start nature are often prime locations for forced accidents.
- Keep your distance from cars that might rapidly pull out of junctions and then brake in front of you.
- Have extra vigilance if you drive a larger commercial vehicle – these are targeted more often.
- On dual carriageways and motorways, beware of cars that might suddenly swerve in from a faster lane and force you to drive off-course into another vehicle.
‘Fronting’ – the crime you might not know you’re committing
‘Fronting’ is a term used to describe someone falsely claiming to be the main driver on a car insurance policy.
Rather than fraudulent activity carried out by gangs, this is a practice many individuals carry out on behalf of their children, without realising how severe the implications could be.
Most commonly, a higher risk driver – such as a younger person who has only recently passed their driving test – is added as a named driver to a car insurance policy, when they are actually the main driver or owner of the vehicle.
If a driver is found to be fronting after being involved in a car accident or making a car insurance claim, they may have all or part of the insurance claim refused. In addition, their policy could be cancelled and they could face prosecution for fraud, which can lead to a criminal record.
What’s more, they could find it difficult to get insurance again in future.
There are several legal ways to cut the cost of your car insurance – for instance, rather than fronting, naming an older, dependable person as an additional driver can bring down the premium.
- Find out more: Car insurance for the under 25s and over 50s
What to do if you’ve been affected by insurance fraud
If you think you’ve been the victim of any type of fraud, contact the police. Take photographs, make sketches, and gather documentation or any other details that might be useful to an investigation.
After a collision, you should try to take the full details of the other driver, and if you think they caused the crash on purpose, explain to your insurer that you think the accident was caused deliberately and why.
If you have information about ghost broking, contact the IFB – you can fill out a form online or call them on 0800 422 0421.
Other useful points of contact include Action Fraud, the UK’s national fraud and cyber crime reporting centre, or the IFED, a department within the City of London Police.