Haunted by a ghost broker: Why the insurance industry needs to redouble its efforts to protect consumers

Fraud is an ever-changing but ever-present threat to the insurance industry. Scammers are constantly developing new and more sophisticated methods to target consumers and sadly insurance scammers thrive amid a crisis. With the rising cost-of-living taking its toll in the UK, insurers and consumers need to be on high alert for fraudulent activity – including ghost broking.

Defined by the Insurance Fraud Bureau (IFB), a ghost broker “pretends to be a genuine insurance broker in order to sell fraudulent car insurance, generally on social media.” A ghost broker will sell you an insurance policy that doesn’t exist, leaving the “policyholder” without cover and not liable to claim. It could come down to something as simple as a car insurance deal that looks too good to be true – the chances are, it probably is.

Clare Lunn, Head of Fraud at Markerstudy, discusses the warning signs of a ghost broker, and the two-fold approach to combatting fraud: education and detection.

Ghost broking has become one of the highest risks for insurers, from both a financial and reputational perspective. Today, the average cost of a ghost broking case can tally up to £2,000 per customer – and occurrences are on the rise. The IFB discovered over 55,000 fraudulent motor applications were made between October 2021 – October 2022 in the UK. With thousands of these linked to ghost broking, the figure is more than double that of the previous year.

A crime set to increase: Prevention against ghost broking needs immediate action

It’s time to redouble the focus on ghost broking, and that means improving detection methods, increasing consumer education and taking a more proactive and innovative approach. Today, there are three factors driving the growth of ghost broking as a crime:

• Opportunity: social media has made it easier for criminals to advertise en masse while hiding their identity.
• Need: motor insurance is compulsory, so ghost brokers target young people, or people where English is their second language, and people from overseas who are working in the UK.
• Risk: this is a low-risk crime to the criminal. It’s hard to pinpoint who ghost brokers are, and when we do catch them, the sentences are too light to act as a deterrent.

Financial hardship represents the biggest threat

Current economic uncertainty puts consumers and insurers in an extremely vulnerable position. Scammers will look to take advantage of those most vulnerable, those in financial hardship, or families looking for ways to reduce costs on household bills. Ghost brokers often target younger road users whose knowledge of purchasing motor insurance is often limited and so can naively fall victim to this scam.

Make the general public aware to avoid ghost broking scams

The industry needs to adopt a more preventative and innovative approach to ghost broking.

First step on the road to halting the rise of ghost broking is to make the general public aware.

It is now a widespread issue, for example over 30% of all cases handled by the City of London Police’s Insurance Fraud Enforcement Department (IFED) are related to ghost broking. But despite its nationwide severity, research by the IFB revealed that only 17% of the UK population is aware of the term ghost broking, and only half of 18–24-year-olds are aware that committing insurance fraud will make it harder to purchase motor cover in the future.

The key for avoiding ghost broking scams will rest in the research and knowing the tell-tale signs. The offer of an incredible deal on motor insurance could be tempting at first, but the consequences certainly aren’t worth the risk – a large fine, points on the driver’s license or it could even lead to vehicle seizure. In general, ghost brokers canvass victims via social media or word of mouth so it’s important to check if the website is registered with the Financial Conduct Authority or be wary if they are requesting to only contact individuals by social media, SMS or a messaging app such as WhatsApp.

A new approach to detection using data enrichment and a cross-industry approach

The time for cross-industry collaboration to create a long-term, strategic plan to combat ghost broking, is now. Insurance needs to be leading the charge, not just supporting it – and it will require all cogs to make the wheel go round. Not only by working collaboratively with colleagues but by joining forces with other sectors to learn from each other and implement new ways of detecting and ultimately stamping out fraud. Social Media companies have a crucial role to play, to seek out fraudsters advertising on their sites and close them down. Staff, data and technology, using public education, intelligence sharing, and proactive crime busting – the industry as a whole must pull together to make real change, through a range of tactics.

Of course, there is no quick resolution to combatting fraud or ghost broking. But more and more insurers are recognising the need to do more with technologies now available – 80% of insurers now use predictive modelling to detect fraud, up from 55% in 2018.

Data enrichment becomes pivotal

By validating transactions via cross referencing from multiple sources, insurers can improve ghost broker detection and pinpoint fraudulent transactions. It’s about ‘knowing the customer.’ ID checks, credit checks, email address validation and vehicle NCD notifications should all be part of the background process, alongside device recognition tools which show where a device has been used fraudulently previously. Increasingly, ghost brokers are also using stolen credit and debit cards, so transaction monitoring is also needed.

The time for action is now – don’t let the ghost brokers win!

Through our industry experience, we know all too well that fraud volume levels increase in times of financial hardship. During the 2010 recession, fraudulent activity increased by 10% – a significant rise when compared to average fraudulent general claims levels of £1.2bn per year. The threat of opportunistic fraud is upon us, and with ghost broking following suit, it’s time the insurance industry joined together to take real action.

Here at Markerstudy, we are committed to working with industry bodies to stamp out this damaging crime, which can devastate people’s lives. Using the expertise and skills within specialist teams will be crucial in eliminating fraud. For example, in 2022 our specialist fraud investigation teams detected 19% more fraudulent claims, compared to 2021, and retained over 30% more new claims within that same time period, which we suspect may be fraudulent.

It’s imperative that fraud and ghost broking detection alongside different prevention methods are taken seriously by the insurance industry. In general, distrust from consumers for insurers is high – and without pulling together to change the fraud status quo, this mistrust will most likely stay high.