Just like any other business, there are a few bad apples out there who can give the wrong impression about insurance brokers. They’ve earned a reputation of their own, and now have a name for themselves, too: ghost brokers.

What are ghost brokers?

Ghost brokers are fraudulent brokers who sell policies — that are either inaccurate or inactive — to unsuspecting customers. They usually operate their "business" in one of two ways:

1. They’ll set up an insurance policy using false information to offer an impossibly low premium.

2. They won’t set up an insurance policy at all, and will send forged insurance documents to the policyholder.

In addition to charging customers the full cost of their premium (which they’ll pocket), they’ll also charge a made-up fee to cover the costs of setting up a policy.

How do you know if you’re working with a ghost broker?

Ghost brokers often target newcomers to Canada — since they’re the most unfamiliar with the system, and therefore unlikely to identify unusual behaviour — though, anyone can be duped by these fraudulent brokers. Some drivers don’t realize that their policy is invalid until they go to make a claim, which can lead to a number of other problems.

Here are some signs to look out for if you suspect that you’re working with an unlicensed broker:

Your premium is unbelievably cheap  

An impossibly low price is a major red flag you’ll want to look out for. You can compare the price they offer by getting quotes from other providers on your own.

They require a deposit 

Licensed brokers will never ask for a deposit or surcharge you for setting up your policy. You’ll only need to pay for your monthly premium, so if you’re ever asked for additional payments or deposits, it’s a good indicator that you may be working with a ghost broker.

Their location 

Ghost brokers may not have a physical office location. They may ask to meet in a public space, or offer to come to your home.

How they advertise 

They often depend on social media or word of mouth to get new business. If you find your broker in one of these ways, be sure to look them up online and try to validate the legitimacy of their business through their online presence, and any reviews from real customers.

Process 

It can be suspiciously easy to set up a policy. They might ask fewer questions than a licensed broker.

Contact information 

Using a personal email address — like a Gmail or Hotmail account — instead of a business one is another red flag. They may also contact you from a mobile phone number, or even text you. Looking up their phone number online is an easy way to tell whether it’s linked to a legitimate business or not.

How can you avoid being duped by a ghost broker?

Well, you can avoid using a broker altogether by purchasing your insurance online, yourself — there’s no one that’ll look out for your best interests as much as you will. Either way, the best way to safeguard yourself against scams like this is to do your research. Be sure to look up any brokers you plan to work with, as well as the brokerages they work for. The internet is a great resource where you can find reviews from real customers, assess the online presence of a business, and track down anything that might look a little fishy. If something seems too good to be true, it probably is.

What should you do if you’ve been a victim of fraud?

It can be tough finding out that someone’s scammed you out of thousands of dollars, and the peace of mind of having insurance. The good news is, you can contact the Financial Services Regulatory Authority of Ontario (FSRA) for help.

It’s important to look out for yourself, especially when it comes to things like insurance. It’s meant to keep you safe, and if you’re going to go through the effort to get a policy, you’ll want to be sure it’s legitimate. By keeping our tips in mind, you’ll be well-equipped to weed out any questionable brokers that may approach you.