Each year insurance scams cost the public, and insurance companies, millions of pounds as fraudsters pray on the complexities of the industry and people’s wishes to save money on policies.
With the amount of money involved, it is simple to see why fraudsters, or gangs, target consumers and insurance companies with insurance scams. In the UK alone, motor insurance generates huge amounts of cash, with over £8.1billion being paid out in claims in 2017 with an average claim of £2,936, according to the Association of British Insurers (ABI).
This is the pot of cash fraudsters are going after with increasing sophistication and planning. Many police forces, including the City of London Police, are increasingly warning of the dangers of an insurance scam called ‘ghost broking’. Fraudsters offer extremely cheap, fake insurance cover to unsuspecting victims.
Fortunately, if you know what to look for it is easy to avoid insurance scams. Read on to discover what to keep an eye on and what to do to avoid falling foul of an insurance scam.
Cash for crash
This insurance scam is exactly what it suggests! Fraudsters, often working in gangs, deliberately cause a crash to collect the cash from a claim. This is a very common problem with the Insurance Fraud Bureau (IFB) stating that these scams cost £340million each year.
Rule 126 of the Highway Code states that you should ‘leave enough space between you and the vehicle in front’. This is what fraudsters are using, forcing you to crash into them from behind making you responsible.
Fraudsters do this in a highly targeted manner picking victims they think will get them the easiest results. This includes mothers with children and elderly people as they think they will be less likely to make a fuss and, commonly, commercial vehicles as they believe companies are unlikely to challenge individuals.
They then claim for a range of compensation payments including, recovery and storage, injury damage and even claiming for bogus passengers. If you are found to be ‘at fault’ from one of these claims, you are likely to see your insurance premiums rise massively and lose your no-claims discount.
How can I avoid being a victim of ‘cash for crash’
The Insurance Fraud Enforcement Department (IFED) has published a list of tips to help you avoid the ‘cash for crash’ insurance scam.
- Keep a safe distance to reduce the risk of running into the back of another motorist. The bigger the gap the smaller the opportunity for fraudsters to cause a collision.
- Look for working brake lights. This is a common ploy to cause an accident. If you can’t see brake lights working clearly, take extra care around that vehicle.
- Check out the car behind. Often drivers will drive to close to your rear forcing you to take concentration off the vehicle in front.
- Keep calm and drive steadily on roundabouts and in stop-start traffic, these are perfect opportunities for a scam.
- Be wary of cars quickly pulling out of junctions and braking.
- Leave extra space and take extra care when changing lanes, especially on motorways.
- Don’t panic if you are involved in an accident. Report the incident in full, take photos of vehicle damage and make notes of who was in the other vehicle. Always take the full details of the other driver. If you think it was caused deliberately let your insurer know.
Ghost broking is a growing problem, with gangs offering fake, ultra-cheap insurance (usually car insurance policies). You’ll think you are saving money, but you’ll end up out of pocket with no cover at all.
Action Fraud received over 850 reports of ghost broking between November 2014 and October 2017 with victims losing £631,000 (an average of £769 per victim).
This is a fairly straightforward insurance scam, with fake salesmen targeting people who pay a lot for insurance, such as young drivers and offer them ridiculously cheap cover. Victims hand over the cash and receive very convincing insurance documents, thinking they are covered.
But using a range of tactics these fraudsters have provided you with fake documents, taken your money and left you without any cover. Being stopped by the police to find you are not covered and the policy is fraudulent will be a shock.
The penalties can be tough, including your insurance being invalid (so you have been driving illegally), getting six points on your driving licence or getting a huge fine. You’ll not only be unable to make insurance claims, but you may have your vehicle ceased and you’ll have to pay to get it back. This is a very serious situation.
Social media is a big platform for ghost brokers, with them running fake adverts on Facebook, Snapchat and Instagram as well as university notice boards, money-saving websites and online marketplaces.
How can I avoid being a victim of ghost broking
- Trust your instincts. If a policy seems too good to be true, it probably is. Just £100 a year for insurance cover sounds enticing but is unlikely.
- Be wary of insurance companies that provide generic email addresses from Hotmail, Gmail, Yahoo or Outlook, instead of a company email address, or mobile numbers, as a primary point of contact.
- Scammers have been known to use Whatsapp to contact people because it is untraceable. Don’t engage with sales messages that come out of the blue on that platform.
- Avoid contacting insurance companies advertised on noticeboards in newsagents, supermarkets or pubs.
- If the quote appears to have come from a legitimate insurance company, contact their head office to confirm the claim. You can also check up on companies using the Financial Services Register, which lists the details of all firms and individuals regulated by the Prudential Regulation Authority (PRA). For you policy, you can see if it is listed on the Motor Insurers Bureau's Motor Insurance Database.
Other common insurance scams
This involves a fraudster purchasing a policy using another person’s details to gain a more favourable deal on a policy. On paper, this means you are the person ultimately liable under the policy and also any issues that arise with it.
Fraudsters illegally obtaining personal data from insurance scams can sell that information on to personal injury companies or personal injury solicitors. This is often used to encourage potential claimants to submit personal injury claims, whether valid or not.
Take steps to ensure that anywhere you submit details to is legitimate and secure, especially online.
The key to avoiding these common insurance scams is to be aware of how legitimate insurance companies work and avoid anything that appears out of the ordinary.