We fully expect we will see an increase in fraud in the coming year,’ says head of counter fraud

Insurers have been told they must come up with new ways to stem the rising tide of ghost broker activity as the cost of living crisis has the industry braced for a surge in fraudulent activity.

Clare Lunn, head of counter fraud at Markerstudy, told a Ghost Broking webinar held last month that any downturn in the economy would only increase the potential for ghost brokers to defraud insurers and the public.

Looking at the industry’s efforts to clamp down on ghost brokers, she said: “It is effectively like whack-a-mole. Take one down and another pops up.”

“Ghost broking is seen as one of the biggest threats both financially and reputationally to the industry,” she added.

“It is estimated that it will cost those who fall victim to a ghost broker on average £2,000.”

Ghost brokers are individuals or organised crime gangs who act as a middle man in an insurance transaction, often luring policyholders with promises of discounted rates when in reality they sell fraudulent policies.

False and fraudulent

“Many [ghost brokers] will look to use fake risk information to obtain cover from an insurer at a reduced rate, which they will then pass on to the policyholder at a higher price,” added Lunn.

“They may simply produce false and fraudulent documents from a bogus insurer which never exists, or will take out a genuine policy, then cancel a few weeks later and pocket the premium.”

She added: “What they require is opportunity, need and risk and at present the cost of living crisis is creating a demand for cheaper insurance which is likely to see cases of fraud only increase.”

Lunn said social media is becoming a powerful medium for ghost brokers given they can advertise to huge numbers but can hide their real details behind fake profiles.

She warned that the insurance industry had to look to new methods of communicating the threats to the public.

“These ghost brokers will look to target the most vulnerable, such as young drivers, foreign nationals and those for whom English is not their first language,” Lunn explained.

“There is not easy fix, or silver bullet. If there was, we would have solved this issue years ago.”

As such, Lunn believes the industry should produce warnings and training documentation in a range of languages.

“For instance, training around how to place insurance with a reliable insurance company and via a legitimate broker should be part and parcel of learning to drive,” she said.

“As such, it may be a case of engaging with driving instructor associations or organisations to explore if it is something that can be delivered as part of that training.

“Insurers have been working hard to address the threat but it is difficult. The pressure on people’s incomes means they are increasingly looking to save money – we fully expect we will see an increase in fraud in the coming year.”