As reported losses for ghost broking victims being higher for younger people who are often targeted via social media according to Action Fraud, brokers could play a crucial role in stamping out this crime

Brokers could play a “real significant role” in helping to combat ghost broking and application fraud given the uptick in criminals finding new and alternative ways to probe every part of the customer journey.

This is according to James Burton, senior director of product management at LexisNexis Risk Solutions speaking exclusively to Insurance Times, he believes that ”brokers are so important”, because in some ways “they are the gateway to the customer” in order for the insurance industry to protect the public from the likes of ghost brokers.

Ghost broking is a type of insurance scam, where the scammer often referred to as the ghost broker sells someone an insurance policy that either doesn’t exist or isn’t valid. They usually target their customers through social media, where they offer too-good-to-be-true premiums.

Figures from Action Fraud published in February revealed that 17-29 year olds are most likely to fall victim to fraudsters selling fake car insurance, many likely to be students.

January to December 2020 saw Action Fraud receive 694 reports of ghost broking, with almost a third (29%) coming from victims aged 17 to 29. 

The reported losses for these victims alone totalled £113,500, which is nearly three times the amount lost by 30 to 39 year-olds, equating to each individual losing an average of £559. 

Figures also indicate that 58% of all reports in 2020 were submitted by men, and out of the reports made by 17-29 years olds more than two thirds (69%) were from men. 

At the same time, the City of London Police Insurance Fraud Enforcement Department (IFED) also reported that 2020 saw around a 10% increase in ghost broking in comparison to the previous year.

The broker’s role

Considering fraud tools like LexisNexis’s Emailage Rapid, Burton continued: “That’s all important to being hygiene factor fraud checks, but then actually having that interaction with the customer is also really important in working out who they say they are.

“I think they play a real significant role in this space.”

LexisNexis Emailage Rapid is a fraud risk scoring solution, based on the email address and other personal information provided during the application process.

The company launched the solution in January 2021, with the aim of preventing insurance providers from writing potential fraudulent business and protecting individuals from having their identity compromised.

National SIRA, a syndicated database of cross sector customer risk intelligence in the UK also uses the solution.

Meanwhile, Chris Hallett, head of special investigations unit at Synectics Solutions agreed explaining that although technology is great, ultimately the human element remains key in determining who a fraudster is and who a victim is, “otherwise, chaos will exhume”.

He said: “From a SIRA point of view, the brokers are brilliant in terms of sending in huge volumes of the quotes and the business that they place and where that risk is placed, which insurer is underwriting it, so in terms of a source and collecting data – they’re absolutely incredible.

“Syndicated data – some people said it has had its day, and you don’t need it anymore because you’ve got AI [artificial intelligence], machine learning and predictive analytics. I disagree. Those things definitely have their place, but syndicated data is seeing what everybody else is seeing – it’s just phenomenal, you just can’t beat it.

“I would implore insurers to do as many checks as they possibly can, and every time they possibly can.

“If you’ve got counter fraud intelligence, don’t just hold it to yourself, get it out there and share it, because if you share it with other people, they will reciprocate and share it back to you.”

“That’s how National SIRA has that power to it.”

Shifting landscape 

Meanwhile, Hallett, said that the fraud landscape “changes every day”; however, the industry is experiencing the same issues from over a decade ago whereby people are manipulating their insurance details to get cheaper premiums.

He added: “Ghost brokers are doing this on mass, and they’re doing it for huge swathes of the country with illegal Facebook sites [for example], and they’re not regulated by the industry.”

Ghost brokers using social media to target potential victims has recently become a prevalent issue, specifically among younger generations who may be experiencing financial pressure. For example, university students and individuals on furlough who are facing the risk of redundancy.

Struggling with money therefore “changes how people approach risk and whether they are willing to engage in someone that might look a little bit dodgy”, added Burton.

Circle of gloom and doom 

If an individual does fall victim to a ghost broker, they automatically become an “intrinsic part of that fraud ring”, said Hallett.

Once an insurance company flags the policy that the victim acquired as being invalid, “that poor [often] young individual then gets marked as a fraudster in SIRA and other counter fraud databases”.

Hallett continued: “Then, I’m not going to say that their life is scuppered, but they’ve put a significant fraud marker against themselves for the next six years – it could [then] become extremely difficult to get another insurance policy, to get a credit card, to get a mortgage, or loan.

“Through 10-seconds of not thinking about the potential consequences of using a ghost broker or doing that piece of application fraud – the knock-on ramifications are significant.

“So, it’s not just a money problem, it’s not just that insurance companies are the faceless victim of money fraud, it’s not, it’s much bigger than that.

“Not only is it a multi-million-pound problem – it’s an ethical and moral problem.”

In the scenario of a case being successfully challenged, Hallett noted that Synectic Solution’s will mark the individual as a victim on the National SIRA database, and they will be treated as “completely innocent,” however, if large networks of ghost brokers are involved, this process can “take an inordinate amount of time”.

As a result, the victim who initially thought they were getting a good deal ends up in a “self-fulfilling prophecy [and] looking at a circle of gloom and doom”, he added.

Ethics and morality

When discussing ethics and morality at macro level, Hallett highlighted that the “huge sums of cash” that the larger ghost broker networks generate “genuinely ends up going to fund organised crime”. This can include gun running, drug smuggling, and people trafficking – “it gets pretty grim”, he said.

In November 2019, for example, the Insurance Fraud Bureau (IFB) reported that Tan Lam Le from Birmingham had been sentenced for selling fraudulent motor trade insurance policies to an organised criminal group. It is believed that he then helped the gang carry out drug crimes on UK roads as the criminals were able to drive without police disruption.

In another instance, the IFB supported the successful prosecution of a criminal gang who were using fake insurance policies to traffic women from Eastern Europe into the UK, while being exploited as adult sex workers.