Imagine your employee gets injured in the workplace and they want to claim compensation. You go to your insurer to make a claim for your expenses and the insurer tells you that you haven’t got a policy with them and you never have.
Unfortunately, this is a reality for many business owners who’ve been scammed by ghost brokers. But what is ghost broking? And what can you do to avoid getting caught in a scam? Keep reading to find out.
Ghost broking: the essentials
Ghost broking is a type of insurance scam where fraudsters sell fake or invalid insurance policies. Leaving victims uninsured and potentially facing significant financial losses or fines.
Scammers use methods like buying and canceling real policies, forging documents, or submitting false information. To avoid this, always buy insurance from trusted sources, be wary of unusually cheap deals, and verify the broker’s credentials, especially their FCA number on the FCA register.
What is ghost broking?
Ghost broking is a type of insurance scam where people are sold insurance policies that are either fake or invalid. Scammers create false or misleading documentation to trick you into thinking that the policy is real – only to pocket the money themselves, leaving you without insurance.
The reason ghost broking works is because they offer much cheaper policies than the going rate. So people who are looking at multiple quotes for their insurance might be tempted by a reduced price.
This is also why it becomes more common during financial crises like Covid-19 and the rising cost of living, as more people look to save money on their policies. And it’s typically associated with insurance policies that are a legal requirement, like car or employers’ liability insurance.
Examples of ghost broking
Scammers advertise their policies to appear like any other. They’ll promote their cheap prices on social media and online to get people’s attention.
Ghost brokers tend to use ads that target people who’ve visited legitimate websites when looking for insurance, then promote their own cheaper deal.
They then convince someone the policy they’re purchasing is real in a few different ways.
Ghost broking cancellation scam
In this scenario, a ghost broker will purchase a real policy and send your documents to you. Once you’ve transferred the money to them, they’ll cancel the policy, leaving you without your money or insurance.
Ghost broking forged documents scam
Another strategy employed by scammers is to forge policy documents. They’ll either send you totally false documents on a policy that doesn’t exist or they’ll forge your details onto a real policy that’s different to the one you want.
Ghost broking false information scam
Another way ghost brokers make their scams convincing is by entering false information into a policy. This is usually targeted at people who are being quoted higher premiums because of potential risks in insuring them.
A self-employed builder that regularly works at height might be quoted an expensive premium because of the risks in their job. A ghost broker would build a policy that excludes all of the things that increase the price of a policy, so they appear to have a better price.
Potential impact on your business
A massive issue with ghost broking is that lots of people don’t realise they’ve fallen victim to a scam until they try to make a claim. They contact who they believe is their insurer only to discover they’re not covered and have to handle the cost themselves.
And when it comes to your business, being uninsured can have a huge impact. In cases where insurance is a legal requirement, like with employers’ liability, you can be fined up to £2,500 each day you’re uninsured.
But even if a cover isn’t a legal requirement, you could still be hit with an unexpected bill. If a customer was hurt in your workplace and you wanted to claim on your public liability insurance, for example, you wouldn’t be able to. You’d then have to front the costs yourself.
The best way to protect your business from these situations is to spot these scams early.
Three tips to avoid ghost broking scams
1. Use trusted sources
Before you commit to buying insurance from someone, you should check their customer reviews on sites like Feefo and Trustpilot. See where the broker works and what others’ experiences with them have been like.
2. Question the pricing
Question why the price they’re offering you is lower than what you’ve been quoted elsewhere. Ghost brokers use cheap deals to grab people’s attention, so always be cautious with below average prices. Running a quick quote with Simply Business could give you a sense of what to expect for the cover you’re after.
Sometimes it might be that you’re getting a lower level of cover but most of the time when a deal seems too good to be true, it is.
3. Check your broker’s credentials
If you’re worried you might be dealing with a ghost broker, you should ask to see their Financial Conduct Authority (FCA) number. A registered, legitimate broker will always have an FCA number and if they don’t, it’s a sign you may be getting scammed.
And if you’re given the number, check the FCA register to verify if the number is real, as some scammers might give you a fake number. If the details your broker has given you are the same as on the register, that means they’ve been authorised by FCA.
Ghost broking – the key takeaways
- ghost broking is a serious insurance scam – fraudsters sell fake or invalid insurance policies, leaving you completely uninsured even if you think you’re covered
- it thrives on perceived cheapness – scammers often target individuals seeking very low-cost insurance, particularly for mandatory policies like motor or employers’ liability
- scammers use various tactics – this includes buying a real policy and then cancelling it after you pay, forging policy documents, or falsifying your personal details to get cheaper but invalid polices
- the consequences are severe for victims – you only discover you’re uninsured when you need to make a claim, leading to significant unexpected costs and fines
- check credentials – crucially, verify a broker’s FCA number on the official FCA register
- always verify before you buy – use trusted sources and buy directly from insurers or well-known, regulated brokers. And question too-good-to-be-true prices, unusually low premiums are a major red flag
Ghost broking – FAQs
What is the FCA register?
The Financial Conduct Authority (FCA) register is a public record of all authorised financial services firms and individuals in the UK. It’s a crucial tool for consumers to verify if an insurance provider or broker is legitimate. Always check this register before purchasing insurance.
How do I report a ghost broker?
If you think you have information about a ghost broker, you should report it to Action Fraud, the UK’s national reporting centre for fraud and cyber crime.
What types of insurance are targeted by ghost brokers?
Ghost brokers most commonly target mandatory insurance policies, with car insurance being the most prevalent. Other types of insurance, such as home insurance and employer’s liability insurance, are also targeted.
More useful guides for small business owners
- Whatsapp scams and online fraud: how to protect your business
- A guide to small business cyber security
- HMRC scams to watch out for
- What is public liability insurance?
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