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