What is an insurance scam?
Insurance scams can target policyholders directly (fake policies, ghost brokers) or involve fraud against insurers (staged accidents, inflated claims) that ultimately raises premiums for all honest customers.
Last reviewed: 10 June 2026
Explanation
Insurance fraud operates on two sides of the market. Consumer-facing insurance scams include ghost broking: fraudsters pose as legitimate brokers, sell fake motor or travel insurance at attractive prices, and issue worthless policy documents. Victims discover they are uninsured only when they make a claim or are stopped by police. Premium diversion scams collect premiums from customers but never forward them to a real insurer.
On the other side, some policyholders commit fraud against insurers. Staged vehicle accidents, deliberately caused property damage, and exaggerated or fabricated claims are common. While individual fraud may seem victimless against a large corporation, these frauds increase premiums industrywide, effectively transferring cost to all honest policyholders.
Insurance fraud in hiring contexts also occurs: contractors and tradespeople present fake certificates of employers' liability or public liability insurance to win contracts. Clients who rely on this coverage later discover they have no recourse if an incident occurs.
Verify any insurance policy by contacting the named insurer directly using a number from their official website — not the one your broker provides. For motor insurance specifically, check the relevant national database of registered vehicles and policies.
Common red flags
- Insurance premiums significantly below market rate from a non-standard broker
- Policy documents that look genuine but cannot be verified on the insurer's official systems
- A broker who communicates only through messaging apps with no verifiable physical address
- Premium payments requested in cash, bank transfer, or gift cards rather than standard payment
- A contractor or tradesperson who is reluctant to provide insurance documents in advance
- Third parties at the scene of a minor accident who are unusually insistent or have a lawyer on call
What to do now
- Verify any insurance policy with the named insurer directly before relying on it
- Check motor insurance on your national Motor Insurance Database if available
- Report ghost broking to your national financial regulator and police
- If involved in a suspicious accident, note all details and report concerns to your own insurer
- Report suspected contractor insurance fraud before commencing work, not after an incident
Frequently asked questions
What is ghost broking?
Ghost broking is when someone poses as an insurance broker, sells a fake or improperly obtained policy, and takes the premium payment. The victim has a policy document but is not actually insured. This is most common in motor insurance and can leave drivers facing serious legal consequences.
Why does insurance fraud affect me as an honest policyholder?
Insurers factor fraud losses into premium calculations across all policyholders. Fraud raises the overall claims cost that premiums must cover. Reducing insurance fraud is therefore in every honest policyholder's financial interest.