Unauthorized brokers and ghost brokers

Authorized vs. unauthorized brokers

There are basically three ways to buy an insurance policy:

1. Directly from the insurance company (a.k.a. underwriter or carrier)
2. From an agent, who sells insurance on behalf of one insurance company
3. From an insurance broker, who can sell policies from several different insurance companies

A broker helps individuals buy insurance by shopping around on their behalf with multiple insurers. Brokers can sell policies only from the insurance companies with which they have contracts — those contracts make them authorized brokers.

An unauthorized broker is a broker (or someone posing as a broker) who sells insurance on behalf of a company when they don’t have a contract allowing them to do so.

Unauthorized brokers take different forms. For example, a licensed and otherwise-legitimate brokerage could be selling policies on behalf of an insurer with which they have no contract.

Or, an unlicensed individual could pose as a broker, collecting personal information and payment from clients and offering fraudulent insurance policies in exchange. Such individuals are often called ghost brokers.

What is a ghost broker?

A ghost broker is an unlicensed, unauthorized person disguising themselves as a legitimate insurance broker. Ghost brokers don’t represent any insurance provider; they are simply defrauding their customers.

There are a couple of methods by which ghost brokers accomplish this fraud.

1. Falsifying insurance documents

Ghost brokers may provide entirely false policy documents to their victims, making them believe that they are insured.

The ghost broker in this case would simply pocket the money they collect from the victim. If that victim later suffered (for example) a car accident and tried to make a claim, they would have no recourse. If the insurer listed on their false documents is even real, they would have no record of that person and no obligation to pay any claims.

2. Fraudulently purchasing a real policy

Ghost brokers may take a victim’s personal information and buy a policy on their behalf. Often, they can accomplish this with a provider’s public, online sales system.

This involves collecting money from the victim to cover the policy premiums. To profit, the ghost broker may lie about the actual cost and pocket the difference, or simply charge a fee — something most personal insurance brokers never do.

In this case, the outcome is a real insurance policy. Often, an insurer may still be expected to honour the policy, at least to some extent. However, there are still problems for the victim.

For one, it’s unlikely that the information provided by the ghost broker is accurate. Particularly with payment details and contact information, things may be falsified to keep the victim in the dark. If an issue arises with the policy or payment, the victim may never know; their policy could be cancelled, and they never hear about it.

If the ghost broker misrepresents anything on the application, like the home’s occupancy or the applicant’s claim history, the policy could be void. Given the fraudulent nature of the transaction, there’s likely to be at least some misrepresentation.

Additionally, it’s unlikely that the ghost broker bought a policy with adequate coverage for their victim. On the contrary, it’s more likely they attempted to maximize their earnings by underinsuring the victim.

It’s possible to buy a legitimate policy on behalf of someone else. However, no insurance provider will proceed with the transaction until they receive clear authorization from the would-be policyholder. In the case of a ghost broker, they can’t have their victim speak with the provider directly, as it would reveal their scam. Instead, they falsify contact information and lie about their identity to complete the sale.

How to protect yourself from ghost brokers

Ghost brokers are scammers. When you’re shopping for insurance, use the same vigilance you’d use to protect yourself from any scammer. If something feels wrong, back away and do some due diligence.

To start with, know who you’re dealing with. Luckily, insurance brokers and agents have strict licensing requirements in Canada. Any qualified broker or agent will be happy to provide you with their licence details upon request. You can look them up with your province’s licensing body:

• British Columbia
• Alberta
• Saskatchewan
• Manitoba
• Ontario
• Quebec

Don’t give out any personal information until you’re confident that you’re speaking with a licensed broker or agent.

If you suspect you’ve discovered a ghost broker, don’t proceed to deal with them. Report them to the police and to the Insurance Bureau of Canada (IBC). If the ghost broker claimed to represent a specific insurance company, you should contact that company directly as well.

If you’ve purchased a policy from a ghost broker

If you’ve already purchased a policy from a ghost broker, report them to the police, the IBC, and the company they claimed to represent (if it’s a real company).

Assuming the policy is real, the insurance provider will work with you to correct any discrepancies in your policy or, if necessary, cancel it and write a new policy.

Buying Square One policies through third parties

Square One is a licensed agent and does not offer policy sales through any broker or sub-broker. While we are not an underwriter, we offer policy sales and service on behalf of our underwriters.

The only ways to buy a Square One policy are:

1. Through our website (squareone.ca) or app
2. By contacting one of our licensed agents (at 1.855.331.6933)

It’s possible to start a quote on a third-party insurance comparison site, but finalizing the policy still happens directly with Square One.

If you’re unsure whether someone selling you a policy is a legitimate representative of Square One, please don’t hesitate to contact us.

Want to learn more? Visit our Home Insurance Basics resource centre for dozens of helpful articles to guide you through the ins and outs of home insurance. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.