Ghost Brokers: Is the Car Insurance Scam Still Happening?

Ghost brokers are scammers who pose as insurance brokers to sell either fraudulent or nonexistent auto insurance policies. Often, these scams take place on social media, although they may also occur through local businesses, word of mouth, student websites, or forums about money-saving.

Ghost brokers target those they consider more vulnerable who may have less experience with the insurance market, such as college students, teen drivers, or undocumented immigrants. Typically these individuals have higher insurance costs, and may be eager to reduce their insurance expenses — as a result, they are more likely to fall for scams or prices that seem to be good to be true … because they are.

Ghost broking typically works in one of three ways: forgery, falsification, or cancellation. 

Forged Documents

Some ghost brokers buy real auto insurance documents and alter the names and dates to those of the person they’re scamming, passing them off as legitimate policies. They sell the policies to multiple people, collecting the premiums without actually providing the insurance service.

Falsified Documents

Other scammers buy real policies for customers but falsify their personal information to lower the cost of auto insurance. For example, because auto insurance costs more for teens, ghost brokers may report the driver as being older than they really are. Or, if someone lives in a neighborhood with a dense population and high rates of auto theft and car vandalism, the ghost broker may change the submitted ZIP code to one with fewer people and lower crime rates. 

The issue arises when the insurance company finds out about the falsified information. They’ll cancel the policy, which will leave the victim without insurance and make it harder for them to get insurance in the future. Meanwhile, the scammer will collect the prorated refund, leaving the customer high and dry.

Canceled Policies

The last method of ghost broking is when a scammer buys a real policy with real driver information but then, without the knowledge of the customer, cancels the insurance and collects the refund.

Because ghost broking is such a recent phenomenon, there’s no good national data on how common it is in the U.S.  However, we know that from 2019 to 2023 there was a 105 percent increase in the volume of suspected digital fraud cases, overtaking the 90 percent increase in overall digital transactions³. Ghost broking has also become a more globalized problem, with a reported 21,000 people in the UK falling victim to the scam in 2022⁴, and insurance providers in Canada issuing Ghost Broking warnings to its customers⁵.

The consequences of falling prey to ghost broking and driving without real insurance, even unknowingly, can include fines, points on your record, and more expensive policies in the future. In the worst-case scenario, you could be convicted of insurance fraud, leading to imprisonment or community service.⁵

You may face consequences even if you haven’t been personally affected by ghost broking. Generally, insurance fraud, not including health insurance scams, costs consumers more than $40 billion a year, which breaks down to $400-$700 more in auto insurance costs for the average American family. As car insurance companies determine their pricing, they take fraud into account, causing premiums to rise for all — not just direct victims.

So, how can you tell if a broker is legitimate or not? Look out for the following red flags.

• Cash-only payments: Agents who demand payment in cash only should raise alarm bells, whether they want the funds delivered in person, through social media, or via cash exchange apps.
• Advertising on social media or messaging apps: Most legitimate brokers don’t advertise on social media or messaging apps in the first place.
• No phone communication: Another red flag is the purported broker wanting to speak only over social media or email; it’s difficult or even impossible to get them on the phone.
• No direct communication with the carrier: Unlike an insurance agent, an insurance broker acts as a middleman between an insurance carrier and a customer. As a result, there should be some direct communication or shared documents between you and the  actual insurance provider. If you’ve only communicated with the broker throughout the entire buying process, that’s a sign they might not be legitimate.
• Rates that are “too good to be true”: We all want lower car insurance rates, but if the premiums seem too low, the policy might not be real.⁶

Fortunately, there are a few easy ways to lessen the chance of getting scammed.

1. Know the risks: According to the insurance fraud bureau, only 17 percent of people have heard of ghost broking¹⁰. Just knowing this scam exists and how it works will reduce your chances of falling victim to a fraudster.
2. Shop legitimate sources: Avoid getting your car insurance on social media or money-saving websites, which are hotbeds for unregulated and unauthorized businesses.⁷ Instead, get your car insurance through licensed insurance agents, brokers, or providers. You can check to see if a company is legitimate by using the Better Business Bureau.⁸
3. Check if the broker is licensed: Make sure the broker is licensed to sell insurance in your state. You can contact your state’s insurance department directly or use the database from the National Association of Insurance Commissioners at https://sbs.naic.org/solar-external-lookup/.
4. Question pricing: Auto insurance rates can vary significantly based on location, driving history, and other factors. But if your broker is quoting you a significantly lower price than other providers, you might be dealing with a ghost broker. Do your online research to compare policies, and get multiple quotes from different brokers and providers to understand if the policy you’re being offered is just too good to be true.
5. Avoid premature signatures or payments: Until you’ve verified the broker is licensed, don’t sign anything or send any money. This simple precaution could stop you from losing hundreds or even thousands of dollars.

Despite our best prevention efforts, we can all fall victim to scams. And with scams becoming more sophisticated, there’s no shame in realizing you’ve been dealing with a fraud. If you’ve been impacted by ghost broking, here’s what to do.

1. Contact the National Insurance Crime Bureau (NICB): Report the incident by calling 800-835-6422 Monday through Friday, 7 a.m. to 7 p.m. CT, or using the online form at https://www.nicb.org/how-we-help/report-fraud.
2. Report the fraud to your state’s insurance fraud bureau: The Coalition Against Insurance Fraud lists the contact information for each state’s insurance fraud bureau at https://insurancefraud.org/state-insurance-fraud-bureaus/.
3. Contact the insurance company: It’s important to let the insurance company know about the situation, both for your own protection and because the provider is being defrauded as well. Find the number for the insurer’s fraud hotline on their website.
4. Report the fraud to your local FBI office: For further investigation, you can also report the scam to your local FBI office, which you can find at https://www.fbi.gov/contact-us/field-offices.⁹
5. Contact your bank: Reach out to your bank to let them know you have been scammed. In some cases, they may be able to reverse charges made to the scammer¹⁴.