Lorraine Explains: Beware bogus insurance brokers

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Every article about auto insurance tells you at some point to shop around. It’s sound advice, but like everything else in the online world, you still have to make sure the business you’re dealing with is legitimate.

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The latest trick being played on the unsuspecting by the unscrupulous is fake auto insurance. Call the 800 number, talk to a “broker”, sign up for insurance, remit your payment, get your pink slips. Sounds about right, right?

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Lorraine Explains: Beware bogus insurance brokers Back to video

Wrong.

Back in June, the Financial Services Regulatory Authority of Ontario (FSRA), the body that oversees the insurance industry in Ontario, put out a warning about a bogus broker, Hidden Ace Brokerage. Unlicenced by the Registered Insurance Brokers of Ontario (RIBO), Hidden Ace was operating in the GTA with a Facebook page, a WhatsApp, an 800 number as well as a local number, and a website by the same name. 

“Consumers who purchase items or insurance from individuals or entities that are not licensed as agents or insurers in Ontario are not protected under the Insurance Act and the regulations that govern Ontario’s licensed insurance companies and agents,” says a Cision report . The problem is that you might not discover this until it is too late; when you go to file a claim.

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There are thousands of insurance brokers in the country. With the transformation of the way we do business — what don’t we buy off a website? — it can be easy for consumers to be fooled. Most of us tend to renew year after year with the same company, but as auto insurance prices soar, it means more people will be tempted to do what we keep telling you to do: shop your policy. With your focus on rates, you might overlook the first basic question to ask: are you a registered broker?

The Hidden Ace website apparently sported real logos of real insurance companies, had a handy FAQ page and other realistic, professional touches. What caught the regulator’s eye was a referral page: $50 bucks if you sign up your friends. “ If YOU want to be apart (sic) of the movement to SAVE money AND GET PAID to help others save money;  NOW YOU CAN!!” Call me a cynic, but that would have given me pause. It’s fairly easy to make a really professional-looking site, which is why scammers can set up shop, rip you off, and ride away. 

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“In theory, the industry can try to block access to websites operated by unlicenced miscreants purporting to place insurance, but this would require forensic investigators and possibly court orders against innocent internet service providers (ISPs),” says Canadian Underwriter in a follow-up article in their August/September 2021 edition. In other words, consumers need to be increasingly careful about who they’re dealing with, because there is little to stop anyone from putting up a website that really is a web, fashioned to bait the unwitting.

Auto insurance quote generator sites are all over the place, and should be tied to regulated brokers or insurance companies. Drivers are used to using them, and might not look past the number they’re being offered — which with scammers, of course, will be too good to be true. But in desperate times, people will go farther out on a limb. FINRA in the U.S. has good tips for spotting a fraudulent site ; it’s about brokers in the investment industry, but the information is good. 

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In that Canadian Underwriter article, a real broker reported a similar troll a decade ago. Scammers had tweaked the brokerage’s name to lure in real consumers with fake coverages. In a surprise twist, however, when victims found out, many refused to go to the police. The real broker surmised that the real victims may have indeed had fake insurance, but that they’d obtained it by fudging the facts on their end. “They may have been involved in an accident or perhaps they were pulled over by the police and did not have proof of insurance. So, they might have wanted to try to get someone to give them back-dated proof of insurance. That was merely conjecture, but it logically made sense.” 

As if uninsured motorists aren’t enough of a cost to all of us who are, those with fake pink slips throw another wrench into the works. While law enforcement will be able to ascertain fairly quickly if a slip is fake, can you imagine being in a crash and later finding out the information you diligently took down is bogus?

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Unsuspecting victims, voluntary victims, how many ends are there to this kind of insurance fraud? Back in April, a Toronto woman   was victimized in a variant on the theme. A broker sold her a real policy with a real insurance company but pocketed some of the money he’d demanded she pay upfront to secure a good deal. When that insurance company canceled her policy for non-payment, she discovered the fraud. A 35-year-old Brampton man was charged with defrauding the public, as 20 other victims were discovered. She called a registered brokerage, got a real insurance company policy, and a fraudulent agent. The only red flag was the demand for the payment to be made upfront, and while the case is before the court still, I have one question: who was the payment made out to?

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You can’t drive without auto insurance in Canada. Different provinces have different choices (private or public), but it’s not optional. In Ontario the fine for driving without insurance is $5,000 to $25,000; a full list of the provincial fines is here . You can often save money by comparison shopping, but if you’ve been dumped by your company or piled up too many infractions to qualify with the usual suspects, some website offering you 40 per cent off should make you leery. 

Too good to be true is never true. Don’t hand over your information — or especially your money — until you’ve checked that you’re dealing with a certified broker.