Ghost broking – can it affect your business?

Have you ever heard of ‘ghost broking’ or ‘ghost brokers’?

The scam is typically associated with young drivers who fall victim while hunting for cheaper premiums. However, private motorists aren’t the only ones who should be on the lookout.

Ghost broking is evolving. It’s a growing threat that has serious financial and reputational consequences for small business owners. A recent report from Aviva shows a 22% increase in ghost broking cases over the last two years¹. With the average victim losing over £2,000², it’s time to shine a light on this fast-growing problem.

In this article, we investigate what ghost broking is, how it works, and what steps SMEs can take to protect both their vehicles and their people.

Ghost broking is a type of insurance fraud where the victim is conned into buying fake insurance. The perpetrators (known as ‘ghost brokers’) pretend to be a middleman for well-known insurance providers, claiming they can offer discounts on cover³.

Once they have gained your trust, they commit insurance fraud in one of three ways:

1. They forge cover, including the policy documents, entirely.

2. They give a legitimate insurer incorrect details about the customer so the policy looks cheaper than it should be.

3. They take out genuine insurance on the customer’s behalf, only to cancel it promptly after without telling them.

For individuals and small business owners alike, this leaves them exposed should they need to make a claim.

Ghost brokers tend to scope out their victims on social media or via messaging apps. They don’t exclusively sell fake insurance to young drivers looking for motor cover. They target anyone who buys insurance online. This includes small business owners, tradespeople and van drivers.

SMEs in particular can be vulnerable because:

• They are often juggling many tasks at once and want quick, easy insurance solutions

• They use social media to raise brand awareness and network without realising the danger that these platforms pose

• They want to keep overheads down and are tempted by lower costs

These ads seemingly offer an efficient insurance solution that saves time and money, when really, they’re a ticking time bomb.

Unfortunately, most people won’t realise they’ve been scammed by a ghost broker until it’s too late, and they need to make a claim.

Even if the documentation looks official, it may not be. Some victims have even said that the paperwork they received from the ghost broker was so convincing that it fooled the police⁴.

There are several things to look out for that may indicate a ghost broker is at work:

• Do they have an FCA registration number?

• Does the price feel too good to be true?

• Do they only advertise on social media or through messaging apps?

• Do they requests payment via bank transfer?

• Do they only provide documentation as screenshots or unverified PDFs?

• Are they making you feel pressured into buying quickly with incentives like time limited offers?

Many SMEs allow employees to use their personal vehicles for work purposes. This practice, known as grey fleet usage, can expose a business to significant risk. If an employee unknowingly purchases a fraudulent motor insurance policy from a ghost broker and is involved in an accident while driving for business use, the vehicle will be uninsured. In these circumstances, liability may fall on the employer, leaving the SME responsible for the full cost of damages, claims, and associated legal expenses.

This risk also extends to SMEs insuring their own commercial vehicles. If this is done through a ghost broker, you may be in for a nasty surprise should you need to make a claim.

To add salt to the wound, footing the full bill for claims aren’t the only problem associated with fraudulent insurance policies. SMEs may also experience:

• Company vehicles insured through a ghost broker may be seized, causing operational disruption

• Financial and legal penalties could apply for driving uninsured

•  Reputational damage can occur if the incident is made public.

There are a number of measures that SMEs can put in place to reduce the likelihood of falling victim to a ghost broker. Before you go ahead with any policy, you should:

• Check the Financial Conduct Authority register to verify that the broker is legitimate

• Reach out to the insurer directly to confirm that the policy is valid

• Avoid buying insurance through adverts on social media

• Consider consolidating all business-related insurance, including commercial vehicles/fleets

• Arrange insurance on your employees’ behalf for company vehicles

• Educate your staff on ghost broking scams so they can be vigilant when sourcing cover for business use on their own car

• Add a second line of approval for insurance to avoid hasty decisions being made

One sure-fire way to avoid ghost brokers is to work with a trusted insurance partner. Look for an insurance broker who:

• Is upfront about who underwrites your policy

• Explains your cover without lots of confusing insurance jargon

• Gives you clear documentation

• Understands the unique risks that SMEs face, especially motor and fleet insurance.

Here at Everywhen, we partner with businesses to make their insurance easier to manage. We keep our clients up to date with any new risks that emerge, and we work with them to put procedures in place to lower those risks. When you have a trustworthy broker on side like Everywhen, you can run your business with confidence.

Want to know more? Get in touch on 0330 828 8163.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems, we recommend that professional advice be sought.

Sources

1. Ghost broking surges 22% in two years; Aviva urges crackdown to protect young drivers - Aviva plc

2. Ghost broking surges 22% in two years; Aviva urges crackdown to protect young drivers - Aviva plc

3. Ghost broking | City of London Police

4. 'Ghost broking': Reports of scammers selling fake car insurance rise by 30% over five years | UK News | Sky News