Insurance Scam: Beware Of False Agents & Fraudulent Policies

By Allstate

Last updated: February 2024

Scammers have been known to pose as insurance agents selling cheap, fraudulent policies to consumers who think they're obtaining legitimate coverage from a licensed insurer, according to

Victims may not discover they've been scammed until they file a claim — only to be told that their policy is not in force with the company.

Doing business with these false insurance agents, sometimes called "ghost brokers," could put you, your family and your finances at risk.

Consider the following to help avoid becoming a victim of this type of insurance fraud.

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How Do Ghost Brokers Operate?

Ghost brokers may apply for a genuine policy in your name, keep your premium payments, then cancel the policy shortly after — all without your knowledge. This practice allows the fraudsters to deceive unsuspecting "customers" into thinking they have a legitimate policy. The victim may only find out that the policy was canceled after making an insurance claim.

Ghost brokers typically advertise cheap insurance on social media sites or messaging apps. In fact, insurance fraudsters typically tout policies that are much cheaper than competitors' policies, according to the National Association of Insurance Commissioners (NAIC). A tip from the City of London Police: If a so-called agent's insurance rate seems too good to be true, it probably is.

These watchouts may help you spot a fraudulent insurance agent. Be wary of:

  • Agents who advertise cheap insurance on social media sites or messaging apps.
  • Agents who communicate solely via social media or email. The NAIC says fraudsters may not list a phone number or may be difficult to reach via phone.
  • Agents who ask for cash-only payments in person, through social media or via cash-transfer mobile apps, according to PropertyCasualty360.
  • Agents who promise to secure an insurance policy for you without providing any direct communication or documents from the insurance carrier.

Tips to Avoid Buying a Fake Insurance Policy

If you're in doubt about the legitimacy of an insurance agent or a policy, the NAIC says you should:

  • Call your state's insurance department to confirm that the agent is licensed to sell insurance in your state.
  • Don't sign any paperwork until you've checked that the agent is licensed.
  • Be wary of agents who demand cash-only payment. Don't make any payments until you've confirmed the agent's license.

Read more about protecting yourself from insurance fraud or contact your insurance provider with any questions.