Last month, we took a look at why you should worry if you regularly receive someone else’s mail.
So when we heard about a car insurance scam linked to mail delivery, we wanted to know more — even though the scam is thousands of miles away in Scotland.
Because, dear readers, it’s a small, small world.
The scam could find its way to New Jersey in no time, so we want you to be prepared.
In the U.K., it’s known as “ghost brokering.”
A man in Scotland received a letter from a car insurance company, according to a recent story by Scotland’s oldest daily newspaper.
The letter was addressed to someone who didn’t live in the home.
The homeowner thought it was a mistake, reports said, so he returned the letter to the insurance company.
But a few weeks later, he received another letter for the same person.
He again returned the letter to the insurance company, but this time, he called police, concerned that his address was being used for questionable purposes.
He received a third letter, reports said, and this time he called the insurance company.
The company said it would stop the letters, reports said.
Three more letters came, and each time, the man notified the insurance company.
Each time, nothing was done, he said.
“It causes anxiety for anyone if they have got their address because it makes you think, ‘what else are they using my address for?'” the man told the newspaper.
It’s believed the man’s address was used for “ghost brokering.”
Ghost brokering is the sale of a fake insurance policy at unbelievably cheap rates.
The phony policies come in several different flavors.
In the scam that the Scotland homeowner discovered, a ne’er-do-well uses a fake address that’s in a lower risk area than where the driver actually lives, producing a policy that’s cheaper than competitors.
That’s because some neighborhoods or towns are considered by insurers to be safer — or less likely to have car thefts or vandalism — than others.
So two drivers with the same driving record may have very different car insurance rates, depending on where the insured lives.
The Insurance Information Institute says where you live and where the car is parked can affect the cost of your insurance.
“Generally, due to higher rates of vandalism, theft and accidents, urban drivers pay a higher auto insurance price than those in small towns or rural areas,” it saidon its website. “Other factors that vary from one area or state to another are: cost and frequency of litigation; medical care and car repair costs; prevalence of auto insurance fraud; and weather trends.”
But if the information on the policy isn’t truthful, the policy won’t be valid.
To learn more about how different New Jersey areas may be viewed by insurers, check out this comparison chart by the Department of Banking and Insurance. Note that as insurance premiums are very personal, and your area won’t be the only factor in your premium.
But it is a factor.
Sometimes a driver tries to perpetrate the fraud by lying on an application, and other times an unknowing victim is tricked by a salesperson who presents fake information — information that will lead to lower rates — to the insurance company.
Other ghost brokering scams happen when insurance-reps-turned-scammers purchase a real policy for the driver, but soon cancel it, keeping the premiums for themselves and leaving the driver without insurance.
Even worse, others aren’t real employees of any insurance company. The bogus rep takes premium payments for a policy that doesn’t actually exist, and creates fake insurance cards to give to the victim.
“Unwary drivers will suspend their better judgment, hoping they’ve saved big money on auto premiums, said Jim Quiggle of the Coalition Against Insurance Fraud. “Cutting corners is about to multiply their troubles.”
Imagine you’re pulled over and caught with fake coverage. You could be ticketed, see your license suspended, your car towed, and you could face hundreds of dollars in fines, Quiggle said. Add to that the headache of getting your car back, going to court and clearing up the big mess.
Or worse, imagine being uninsured when you get into an accident.
“Your savings could be wiped out if you have to pay large medical costs from your own pocket,” Quiggle said. “And you could get sued straight to bankruptcy.”
Quiggle said younger drivers with high premiums or a spotty driving record are targeted, as are lower-income immigrants trying to save money or establish a driving record.
“Some people are fooled by the low premiums,” he said. “Others know full well they’re buying junk insurance. They’re willing to risk everything on a ghost gambit.”
The lure of super cheap auto coverage is strong in New Jersey, which still has the highest average premiums in the nation.
In 2013 — the most recent year available — we paid an average of $1,368.27. That compares to the national average $954.30, according to the National Association of Insurance Commissioners Auto Insurance Database Report.
HOW TO PROTECT YOURSELF
Quiggle says this is an especially important step if the insurance company isn’t a household name.
To make sure you don’t get taken, contact the auto insurance company directly to confirm your coverage is real and that your premiums have been received.
Also confirm that the policy number matches the insurer’s records, and watch for typos and misspellings in the policy or the insurance card.
“Beware if the so-called agent hands you a card yet the insurer doesn’t send you a full policy soon afterward,” Quiggle said. “It’s easy for scammers to create realistic-looking policies and insurance cards on home computers.”
Also, Quiggle said, you should avoid cold callers, door-to-door peddlers and email sales pitches.
“Back off if the so-called agent demands cash or money order upfront,” he said. “Play it straight and get legitimate auto coverage from a real insurer, even if costs more.”
If you think you’re the victim of insurance fraud, call the Bureau of Fraud Deterrence at (609) 292-7272, extension 51088, or emailNJInsuranceFraud@njdcj.org.
You can also file a complaint against a New Jersey insurance licensee here.
Have you been Bamboozled? Reach Karin Price Mueller atBamboozled@NJAdvanceMedia.com. Follow her on Twitter @KPMueller. FindBamboozled on Facebook. Mueller is also the founder of NJMoneyHelp.com. Stay informed and sign up for NJMoneyHelp.com’s weekly e-newsletter.