Ghost Brokers
Do You Know Who’s Selling You that Insurance Policy?
You have options when purchasing an insurance policy. You can buy online or work with an agent. You can select an agent who works exclusively with one insurance company, or you can work with an independent insurance broker to explore options. Regardless of how you select your insurance, most importantly, you want to be sure you get your coverage from a reputable company and an agent that you can trust.
Avoid fraud by cautiously choosing a broker
At NICB, we fight insurance fraud, and we know sometimes that fraud starts right from the beginning of the buying process. When you're approached by, or come in contact with, a false insurance broker, also known as a ghost broker, you may become the victim of fraud.
Keep that in mind when a seemingly trustworthy insurance agent offers you an insurance policy with good coverage at a great premium. You may want to lock in that policy as soon as possible, however, that offer may be a scam.
Basically, if a deal seems too good to be true, it likely is. That “trustworthy insurance broker” could be what is known in the insurance industry as a ghost broker who has designed a fake policy to scam consumers and insurance companies alike.
What is a Ghost Broker?
A “ghost broker” is an individual or organization that poses as a legitimate insurance agent but is not licensed or authorized to sell insurance or represent the insurance company they are claiming to represent. These people use social media, fictitious websites, and word-of-mouth to advertise cheap premiums to potential victims. They execute fraud in a variety of schemes from either issuing fake policy documents to purchasing actual policies and then canceling them. In most cases, they divert premium payments and refunds to themselves.
Schemes Forged documents: Scammers create fake insurance certificates or policy documents. Fraudulent Policies: A real policy from a legitimate insurer is completed with false information and sold to the victim. When discovered, the policy is canceled leaving the victim without coverage. Canceled Policies: After purchasing a genuine policy in the victim’s name, the ghost broker cancels that policy without the victim’s knowledge, pockets the refund, and leaves the victim without coverage. |
Who do Ghost Brokers Victimize?
Common victims of ghost brokers include first-time policyholders such as students, the elderly, and non-English speaking individuals. However, these scams are not only detrimental to the insured “customer,” but potentially harm the reputation of legitimate insurance companies. Some fake brokers take advantage of company brands that consumers trust by using their name and branding in the policy documentation. When the scam plays out, the victim and the insurance company lose, while fraudsters and the illicit activities funded by insurance crimes prosper. The victims are defrauded, the insurance company’s reputation could be damaged, and community trust deteriorates.
Protect Yourself from Fake Brokers
By recognizing red flags, consumers can avoid falling victim to a ghost broker. Insurance companies can help customers stay vigilant by recommending that they:
- Verify the broker’s license with the local state regulator
- Check policy documents by contacting the listed insurance company to confirm coverage
- Pay by credit card (not cash or wire transfers) directly to the insurance company, not an individual
- Avoid “too good to be true” premiums or offers made through social media apps
If you need additional guidance on how to select an insurance agent or company, the National Association of Insurance Commissioners has information: How to Choose an Insurance Agent.
NICB is Here to Help
If you believe you or your customers have fallen victim to the tactics of a ghost broker, report them to NICB. We’re here to prevent, detect, and investigate all forms of insurance fraud.