Ghost brokers target victims with “too good to be true” rates

Online consumers have been besieged in recent years by fraudsters who have learned to use technology for devious ends. Insurance clients are no exception, as they face the growing phenomenon of so-called ‘ghost brokers’ targeting them to provide fake insurance coverage.

“Regulators across Canada have identified ghost brokers as a national consumer protection issue,” says Amina Deiab, chief executive officer of the Alberta Insurance Council (AIC) in Calgary. 

Such fraud overwhelmingly involves auto insurance, and it can lead to financial devastation. 

“Historically, we've seen ghost brokers operate in parking lots selling false insurance. But in today's day and age, that has heavily pivoted online,” says Brittany Hand, senior leader of policy investigation at Aviva Canada in Markham, Ont. 

“We see ghost brokers infiltrating social media. They use these digital platforms and messaging apps to reach victims, usually quickly and quite anonymously. And technology has made it incredibly easier to create fake documents and false insurance,” she elaborates. 

Often times, they can sound incredibly convincing to consumers shopping for an affordable and cheaper premium, adds Hand, who notes that ghost brokering statistics are growing across the industry year over year, necessitating an investment in detection systems. 

Andy Dykstra, associate vice president of enterprise fraud with Co-operators, headquartered in Guelph, Ont., says ghost brokers often advertise by offering “rates that can't be beat.”

Individuals who lack insurance savvy and sophistication, such as new Canadians unaccustomed to how the Canadian market operates, or some senior victims because of their age, tend to be victimized by ghost brokers, he explains. 

Ghost brokers typically market to their victims about how they qualify for discounts based on, for example, a group or union affiliation, years of driving experience, or where they live, and other circumstances, Dykstra says. But those rates are not realistic or reflective of the actual risk the consumer would face to draw up a legitimate auto policy, he adds. 

“Parties that engage in this are expert at providing disclosures that generate a policy rooted in misrepresentation, and they do this for a fee. That's what their endgame is,” explains Dykstra.

A downturn in the economy is another contributing factor to an increase in ghost broker activity, says Betty Ng, director of investigative services at Équité Association in Toronto, a national not-for-profit organization that collaborates with property and casualty insurers in Canada to fight insurance fraud. 

When the economy is good, people have a tendency to be more diligent and understanding when deals are too good to be true, says Ng. But with economic hardship, regular Canadians lean more towards wanting to believe they've found themselves a good deal, she adds, noting that an uptick in this activity was noticed in the 2022-23 time period, post-COVID.

The people who fraudulently lure victims are sometimes embedded in online communities, posing as a friend, says Ng.

“They first of all gain your trust. And when they offer a deal, it's always sounding like ‘I'm able to get you a good deal with the insurance company I work for’ without showing proper credentials,” she elaborates, noting that victims think “this person, they claim to operate for a large company. What have I got to lose?” 

The reality is that consumers have quite a lot to lose, say experts. 

Catastrophic consequences 

“I object to the term ghost broker,” says Mark Abraham, chief executive officer of the Registered Insurance Brokers of Ontario (RIBO) in Toronto. “These people are not brokers at all. They're fraudsters, scam artists, crooks, pretending to be something that they're not. 

“The harm they do to consumers goes beyond taking a couple of thousand dollars in premium and pocketing that money. By failing to provide a legitimate policy, these actors lead wouldbe customers to believe they are properly insured when they are not. If an incident occurs and a claim is made, the harm caused by this type of fraud is greatly magnified, leaving consumers exposed at precisely the moment they need protection most,” says Abraham. 

Hand says she has often seen situations during a police stop where a driver produces a false pink slip when asked to provide insurance, resulting in serious consequences.

“And then, of course, if someone goes to place a claim, they find out that they may not have a valid and true genuine policy with their insurance company,” she adds, noting that this is “incredibly difficult to navigate from a financial perspective.” 

There is no regulatory oversight applicable to ghost brokers, and victims are on the hook for the premiums paid as a result of the scam.

In a worst-case scenario, if they get into a serious collision, neither they, nor their loved ones and other people close to them are covered, resulting in a lot of damage to the community, says Ng.

Maintain vigilance 

Education and awareness are the best tools to protect against ghost brokers.

“If you see a deal that may be too good to be true, that should be a red flag,” Hand cautions, adding that alerts should also be raised when a person purporting to be an insurance broker asks somebody to deal with them over social media, or requests payments via an e-transfer, or to any non business e-mail address. 

“To prevent falling victim to a ghost broker, consumers should, where possible, compare quotes from multiple agents or brokers to identify unusually low prices that may indicate fraud,” says Deiab.

Deep discounts should be a source of immediate skepticism. 

“When you’re seeing like a 40 per cent discount from your previous quote that you received from a reputable insurance professional, that is way too good to be true. There is no such thing,” says Ng. 

Even taking into account various potential discounts available, like the winter tires discount, and anti-theft discount - all of that combined will not give a policyholder a 40 per cent discount, she elaborates. 

“We heavily encourage consumers to do their research before they buy insurance. It is critical to make sure that they’re dealing with a licensed broker or agent,” says Hand. 

That information is available online through provincial regulators.

For example, Alberta consumers can protect themselves by ensuring that the broker they are speaking to, or the brokerage they are dealing with, is registered using an online lookup tool provided by the AIC. That registry allows consumers to confirm whether an individual or agency is licensed and authorized to provide insurance services in Alberta, says Deiab. 

In Ontario, a list of licenced brokers is available on the RIBO website, says Abraham. 

The question can also be posed directly. “If there is any suspicion as to whether the person is licensed to sell insurance, ask. And if the person is unable to provide their licence number, that’s highly suspicious,” stresses Dykstra. 

Another plus associated with direct questioning: a consumer that asks detailed questions might push beyond the knowledge of the fraudster and make them reveal that they don’t really know what they're talking about, says Abraham. 

Notify authorities 

If somebody is aware they have fallen victim to a ghost broker scam, they need to contact the insurer listed. “All insurers have some form of mechanism [to] report fraud on their website. That's the most direct channel to have somebody evaluate that, reach out and determine what needs to be done to get the policy corrected,” Dykstra advises. 

It is also important to cooperate with any investigation into the ghost broker party they collaborated with. “If there are records of the communications, provide those. If there was a payment provided, provide that,” says Dykstra. 

They should also report their experience to the Canadian Anti-Fraud Centre (CAFC), as well as to the police, says Ng. 

“When people are falling victim to these situations, it’s no different than the romance scams and the senior scams – they are too ashamed to report. So the impact and the magnitude is never really reported. The true number will never come out unless we drive more awareness,” she stresses.

When local police are informed, intelligence can be collected about who is committing these crimes. The more data collected means “the better we can target and prevent these individuals [from] impacting everyday Canadians,” Ng adds. 

For victims of this type of fraud, “there's not much of a remedy that we can provide directly,” says Abraham. “We are here to enforce the Registered Insurance Brokers Act [in Ontario]. We can take action against the fraudster, but we don't really have the means to make right that [which] went wrong for the consumer themselves,” says Abraham. 

As soon as consumers discover they don’t have legitimate insurance, they must also take swift action to remedy their own situation.

“Make sure you get insurance before you get behind the wheel again,” Abraham stresses.