How to Detect and Mitigate Ghost Broking

Ghost broking is a growing threat in the insurance industry, targeting unsuspecting customers and exposing them to significant financial and legal risks. According to recent reports, insurance fraud costs the industry billions annually, with ghost broking accounting for a substantial portion of these losses.

At its core, ghost broking involves criminals posing as legitimate intermediaries to sell fake or invalid insurance policies. This form of fraud not only affects the victims directly but also undermines the integrity of the entire insurance ecosystem. Detecting and mitigating ghost broking is essential for insurers to protect their customers and maintain trust. In this article, we’ll explore ghost broking, what it involves, and the strategies insurers can adopt to stay ahead of this sophisticated threat.

What is ghost broking?

Ghost broking is a deceptive practice where fraudsters create and sell fraudulent insurance policies, often targeting vulnerable customers unaware of the policies' invalidity. These bogus policies leave victims uninsured and at risk of severe penalties if discovered.

How do ghost brokers operate?

Ghost brokers exploit gaps in insurance processes to achieve their objectives. They often present themselves as legitimate agents, advertising heavily on social media or through classified ads to lure unsuspecting customers.

Some common tactics include:

• Policy fabrication: fraudsters create entirely fake policies that mimic legitimate ones. They generate realistic documents that can deceive even the savviest buyers.
• Policy manipulation: they purchase legitimate policies but manipulate the details—such as falsifying the insured party’s data—to lower premiums and resell them.
• Exploitation of personal data: ghost brokers use stolen or falsified personal information to forge policies, bypassing identity verification systems.

To recruit customers, ghost brokers heavily rely on digital channels: social media, messaging apps, and email are key platforms ghost brokers use to market their services, reaching a broad audience with minimal oversight.

The impact of ghost broking extends beyond monetary loss, causing significant reputational damage to insurance providers and eroding consumer confidence in the industry. Recognizing the modus operandi of ghost brokers is the first step toward combating this pervasive fraud.

Ghost broking: a type of underwriting fraud

Underwriting fraud is a critical issue in the insurance sector that directly intersects with ghost broking. It occurs when false or misleading information is provided during the policy application process, leading to mispriced premiums or invalid coverage. While ghost brokers exploit this process to generate fake policies, underwriting fraud spans a broader range of deceptive practices.

This form of fraud costs insurers billions annually and makes legitimate underwriting more challenging by distorting risk assessments. 

You can dive deeper into underwriting fraud and how insurers can mitigate it in this article. Understanding these underlying fraud mechanisms is crucial to developing robust defenses against ghost broking.

Other types of insurance fraud

Insurance fraud is a pervasive challenge that takes various forms, each undermining the industry’s trust and stability. While ghost broking is a significant concern, it is part of a broader landscape of fraudulent activities that insurers must address.

Common types of insurance fraud

• Identity theft: fraudsters use stolen identities to apply for policies or make false claims. This not only impacts the victims whose identities are stolen but also complicates risk profiling for insurers.
• Policy misrepresentation: applicants intentionally misrepresent information—such as their health, income, or property value—to secure lower premiums or higher coverage than they are entitled to.
• Staged accidents: fraudulent actors orchestrate fake accidents or damages to claim compensation. This tactic is particularly common in auto insurance.
• Application fraud: submitting inaccurate or incomplete data during the policy application stage to exploit gaps in the verification process.

How ghost broking differs from other types of insurance fraud

Unlike other fraud types that may involve a single act of deception, ghost broking is characterized by its systemic approach. Fraudsters establish an operation to repeatedly exploit gaps in insurance processes, affecting multiple victims and creating a widespread ripple effect.

If insurers enrich their overall fraud prevention strategies with valuable data points generated from methodical digital footprint analysis, they can better contextualize, identify and prevent ghost broking. 

Detecting ghost brokers: key strategies for insurers

As ghost broking schemes become increasingly sophisticated, insurers must adopt proactive measures to detect and mitigate this fraud early in the underwriting process. A layered, data-driven approach is critical to identifying suspicious activity and minimizing risks.

Layered detection approaches
Many insurers prioritize a layered detection strategy that combines silent checks, risk scoring, and data correlation during the initial stages of the policy application process. Silent checks allow insurers to verify key data points—such as phone numbers, email addresses, and IP information—without alerting potential fraudsters. This approach reduces the likelihood of ghost brokers bypassing detection systems. Advanced tools, like identity graphs and tailored risk scoring models, have proven to be instrumental in combating ghost broking.

• Identity Graph: this is a very effective way of linking related data points, such as accounts with shared contact information or suspicious patterns of reuse, to flag potentially fraudulent networks.
• Risk Scoring Models: insurance companies can evaluate the likelihood of fraudulent behavior based on digital signals, thus prioritizing high-risk applications for further scrutiny.

Insurers using these methods report significant improvements in their ability to detect ghost brokers before policies are issued, reducing both financial and reputational damage.

How to identify ghost brokers with Trustfull

Insurers combating ghost broking require tools that deliver actionable insights without disrupting the user experience. Leveraging advanced identity intelligence and digital signal analysis can help detect fraud efficiently and at scale.

Digital signal checks
Trustfull offers robust capabilities for analyzing critical digital signals like phone numbers, email addresses, IP addresses, and device metadata. These signals can uncover anomalies that indicate fraudulent activity, such as:

• Disposable or unverifiable email addresses linked to multiple applications.
• Phone numbers with a history of frequent churn or suspicious usage patterns.
• IP addresses flagged for unusual geolocation inconsistencies or high-risk activities.

Silent checks
Silent checks are an essential feature for early fraud detection. Without interrupting the application process, Trustfull’s technology performs background verifications, identifying red flags like mismatched data or connections to flagged accounts. This approach enables seamless user experiences for genuine customers while protecting insurers from ghost broking schemes.

Trustfull equips insurers with the tools they need to tackle ghost broking and other fraud types head-on. Insurers can strengthen their fraud detection processes and enhance customer trust with accuracy, scalability, and user-friendly integration.

Find out how your insurance company can create a safer environment for users by talking to our fraud prevention experts.