The Financial Ombudsman Service has warned drivers of fake car insurance deals circulating online this Autumn which could affect thousands of Britons.
The service said it has seen a sharp rise in ghost-brokers which has caused “severe and unexpected” consequences for drivers who fall victim to the scams.
Ghost brokers use social media to trick thousands of consumers into fake insurance deals which offer policies that either do not exist or are invalid.
The scammers even use fake insurance documents, giving the impression that the buyer is insured when in fact the policy does not exist.
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Ghost broking occurs primarily on social media
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In other fraudulent practices, the scammers may take out a genuine policy in the driver’s name but with false information such as incorrect addresses or driving history to get a cheaper premium, but this can void insurance claims.
Rachel Lam, Ombudsman Director at the Financial Ombudsman Service, said: “Falling victim to these ghost brokers can be a truly terrible experience and could impact your finances for years to come.
“These so-called brokers lurk on social media channels and prey on people just trying to find a good deal for their insurance. It’s a stark reminder that if an offer seems too good to be true it often is.”
To help drivers spot a scam, the Financial Ombudsman Service has outlined key red flags drivers should be aware of when buying car insurance.
If the insurance quote seems significantly cheaper than market rates, drivers should remain wary, likewise if motorists are contacted through messaging apps on social media, or classified ads, rather than through official websites or emails.
Legitimate brokers are registered with the Financial Conduct Authority with drivers told to always check the official register beforehand.
In cases brought to the Financial Ombudsman to be investigated, disputes often arise when victims of ghost brokers have their policies cancelled by the insurer due to misrepresentation.
In one case, a consumer complained to the service after his insurer cancelled his motor policy and added a fraud marker on the insurance database.
The consumer had unknowingly purchased the policy using a ghost broker recommended by a friend. It was only after discovering this that the policy was cancelled.
In response, the Ombudsman acknowledged that the consumer was the victim of a ghost broker and ordered the insurer to reverse its decision to cancel the policy.
However, in some cases, the service has ruled in the provider’s favour. A consumer complained after his motor insurance policy was cancelled, which he believed would increase his future premiums.
The insurer said it cancelled the policy after discovering it was taken out from an IP address, involving a ghost broker, that had set up lots of different policies for different people.
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Some drivers have had their insurance invalidated by providers after being scammed
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The consumer admitted he was introduced to the broker through Snapchat and failed to properly check the insurance documents. The Ombudsman agreed that the insurer was right to cancel the policy in line with its terms and conditions.
