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Students warned about ‘cheap’ fake car insurance policies

Vicky Shaw, PA Personal Finance Correspondent
·3-min read

Students are being warned to watch out for fraudsters selling fake car insurance which appears to be cheap, also known as “ghost broking”.

From January to December 2020, Action Fraud, the national fraud and cyber crime centre, received 694 reports of ghost broking, with nearly a third (29%) coming from victims aged 17 to 29.

Reports of this type of fraud were up by nearly 10% compared with the previous year.

Fraudsters will offer cheap policies, usually via social media or by word-of-mouth.

They pose as middlemen for well-known insurance companies, claiming they can offer legitimate car insurance at a significantly cheaper price.

But the insurance documents are forged, or details are falsified to bring the price down, or genuine policies are taken out but then cancelled soon afterwards.

Most victims do not realise that they do not have genuine cover until they are stopped by police or try to make a claim.

The City of London Police’s Insurance Fraud Enforcement Department (IFED) is relaunching its #SteerClearofFraud campaign to raise awareness of the scams.

Young people are often targeted by scammers because they tend to be on tight budgets and often lack previous experience of buying insurance.

In one reported case, an 18-year-old named Paul lost a total of £2,200.

He dealt with someone using Instagram who claimed they were an insurance broker and could get Paul cheap cover because they had exclusive contact with a reputable insurance company.

He later received full policy documents in the post, which he checked and the details appeared to be correct.

He was then involved in a minor collision but the insurer said the policy had been cancelled. It emerged that incorrect information had been inputted by the broker when the policy was taken out, to reduce the price of the premium.

Paul tried to contact the broker, but they had blocked his number and were no longer on Instagram.

Paul said: “I couldn’t believe what I was hearing when staff from Direct Line Group told me that my insurance was void and read out details from my policy that were completely wrong.

“It’s a horrible feeling and it’s really impacted on my ability to get future car insurance, as companies are now offering me even higher prices than before.”

A previous YouGov survey commissioned by the Insurance Fraud Bureau (IFB) also revealed that one in three 18 to 24-year-olds have seen a suspect insurance advert on social media.

Detective chief inspector Edelle Michaels, of the City of London Police’s insurance fraud department, said: “Whilst the coronavirus pandemic has halted some forms of criminal activity, reports to Action Fraud show that this is certainly not the case for ghost broking.

“2020 saw nearly a 10% increase on the previous year for the total number of reports for this type of fraud, indicating that these fraudsters are still able to operate in the current circumstances.

“There have been examples of ‘ghost brokers’ exploiting the pandemic – we have even seen a case of someone offering discounts to NHS workers on fraudulent insurance policies.

“Clearly fraudsters have no qualms in manipulating vulnerabilities, and with students being in a difficult situation shrouded with uncertainty at the moment, it is vital that they remain wary of this type of fraud.”