Tackling the ghost broker

Posted on: 01 April 2015

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The anonymity provided by the online trading environment is readily exploited by a particular segment of the insurance-buying public. This is not, however, for purchasing their own cover or helping an elderly relative, but instead it’s on behalf of their “victims”. The group in question is, of course, the Ghost Broker.

Ghost Broking has been a thorn in the side of insurers for many years, and there is no sign of it decreasing. The level of sophistication employed by specific fraudsters is increasing; as are the methods used by insurers in their efforts to detect them.

A common tactic used by Ghost Brokers is to infiltrate a vulnerable community, perhaps where English is not a first language and the understanding of the UK insurance market is poor. They look to gain the trust of the community through advertising on the web in their native language, offering their services to arrange cover. They illegally hold themselves out as being insurance brokers, being neither regulated nor authorised to trade in this way.

The Ghost Broker is out for profit, and will charge the “customer” a high but sufficiently attractive price to entice them in, requiring payment in cash. The details submitted online to incept a policy will be manipulated to generate a significantly lower price than the victim was charged, with the Ghost Broker pocketing the difference.

Some will pay using compromised cards, or will default on the first instalment to maximise their financial gain. The vehicle will appear on MID for the period until the premium default or the card chargeback come to light, fooling the victim into thinking they are legitimately insured. Once the policy is voided by the insurer the premium generally is returned, although the administrative costs and aggregator fees (where applicable) are seldom recovered.

To reduce the premium required by the insurer being scammed, Ghost Brokers may well provide fake no claims discounts, allegedly from a previous insurer. Individuals involved in NCD validation need to be extra vigilant in their checks, although options are emerging in the market to participate in and benefit from NCD databases.

As Ghost Brokers have encountered stiffer barriers to bypassing the frequency checks carried out by insurers, some have taken to switching between various e-mail addresses during the quote process in an attempt to mask that the quote manipulation is being carried out by one individual applicant.

In an effort to tackle this issue some brokers have implemented identity checking software within the purchase cycle, which gives a more reliable result than that provided through standard 3rd Party Enrichment. A more recent development which is gaining in popularity is Device Recognition software, which can identify devices (tablets, smart phones, laptops or desktops) returning multiple times for quotes and policy purchases, which may indicate foul play. So far a handful of brokers and insurers have implemented this software in real time.

Utilising intelligence is an increasingly important part in the Allianz counter-fraud strategy. Allianz is part of a group of insurers sharing information on Ghost Broking activity as part of an initiative led by the Insurance Fraud Bureau, whereby the consolidated view of Ghost Brokers across the participating insurers is shared, with action taken as and when appropriate. The IFB is a hugely valuable source of intelligence, and has recently re-shaped its broker membership offering.

Fraudsters are channel-agnostic and don’t discriminate by provider or supplier, so it’s important that we all keep pace with Fraud as it evolves.

One thing is certain - the fight continues...