‘Sounds too good to be true?’ City watchdog clamps down on social media insurance scams
The Financial Conduct Authority is cracking down on insurance scams advertised on social media and messaging platforms after finding half of young drivers have purchased illegitimate insurance premiums this way.
The regulator said nearly 40 per cent of drivers aged 17-25 are “unconfident” in spotting the signs of a fake insurance policy, meaning “thousands could be paying for cover that doesn’t exist”.
Known as ‘ghost brokers’, the scammers pose as legitimate insurance companies but offer much cheaper rates.
The policies up for grabs are either completely fake, invalid because they contain false details to keep the price down, or cancelled shortly after being purchased.
Nearly half of the 1,000 young drivers surveyed said they tend to trust goods sold through social media, which is appealing when insurance cuts a hefty wedge out of earnings, with 15 per cent of young drivers saying they find it hard to fit insurance into their monthly budget.
The watchdog said it plans to work with influencers to “warn young drivers about the growing threat of ghost broking”, but has not detailed what this will involve.
This follows the regulator in March in its paper on its regulatory policies for consumer investments saying it wants more firms to use social media to “displace the scammers” across different sectors.
Cheap offers ‘tempting’ for tight budgets
The watchdog said it is encouraging young drivers to “be wary of offers that sound too good to be true” and to only purchase insurance from legitimate websites which have a phone number and address listed.
“Tight budgets make cheap offers tempting – and scammers take advantage of that,” Graeme Reynolds, director of insurance at the FCA said.
Reynolds added that “driving uninsured could cost you far more than any premium.”
Aviva and the Insurance Fraud Bureau last year both reported an increase in ghost broking. The Insurance Bureau said it saw a 52 per cent increase in the practice in 2023-2024 and Aviva saw a 22 per cent surge in cases since 2023.
Cormac Bradley, senior actuarial director at insurance consultancy Broadstone, told CityAM that despite recent falls in motor insurance premiums, young drivers “continue to face comparatively high insurance costs” which can make cheaper offers on social media “appear more attractive”.
“The FCA’s findings highlight the importance of buying insurance through trusted and regulated providers. If a deal looks unusually cheap or is only available through social media or messaging apps, that should immediately raise concerns,” Bradley said.