Most of us think of insurance fraud as someone trying to defraud an insurance company. However, there is another type of insurance fraud that can affect you when buying a policy. Insurance seller fraud is when a fraudster sells a fake or inaccurate insurance policy. In most cases, they offer very low rates to draw in victims. Once the person pays, they give them forged or invalid pink slips.
Victims of insurance seller fraud may not realize that the broker was a fraudster until their insurance claim is denied. This leaves victims having to pay out of pocket for an incident. If the fraudster supplied inaccurate information on the insurance form, the victim may even find it hard to get insurance in the future.
Ghost brokers are fraudsters that take payment for insurance policies upfront and then disappear. In most cases they provide a forged pink slip. However, they can also set up a real policy and then cancel it without the telling the victim.
Fake brokers often have a real business (e.g., selling cars) and a physical address. They buy an insurance policy in the name of the client and provide an insurance slip. But to get lower rates, they will often include incorrect information in the policy. When it’s time for the victim to make a claim, it will be denied due to inaccurate information.
- The insurance is much cheaper than other quotes. Fraudsters offer very low rates to draw in potential victims.
- They charge you a fee for their services. Legitimate insurance brokers are paid through commissions. They will never ask you for a fee for their services.
- They ask for large payments upfront or ask for payment in cash. You should never have to give cash payments directly to the broker.
Avoiding Insurance Scams
- Double check your agent’s license number with the insurance regulator in your province or territory.
- Read your policy thoroughly before signing. Your personal information should be accurate.
- Check that the policy is connected to your contact information, not the broker’s. This will ensure that you are contacted if the policy is cancelled or changed.
- If you’re unsure about a broker or agent, you can contact the insurance company they are selling the policy for directly. You can also contact the Insurance Bureau of Canada (IBC) to ask if your situation sounds like a scam.
If you encounter insurance seller fraud, please report it to the IBC.
This information is brought to you in collaboration with Sonnet Insurance. Get a home or car insurance quote today.