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Are you one of the 20,000 motorists who could be driving uninsured, after being duped by a 'ghost broker'? Experts are warning that this sophisticated scam is now pulling in thousands of British motorists, and leaving them completely exposed in the event of an accident.

So how does the scam work, and how can you protect yourself?

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How it works

The fraudsters will advertise cheap insurance, at a much lower cost than the individual can get from a genuine broker or comparison site. They may have their own website, or put up notices in supermarkets and newsagents. They may even put a leaflet under your windscreen wiper when you are parked.

Some will claim to have superior broking skills in order to get you a better deal. Others will claim to have a staff discount from an insurer.

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They work in any number of ways. Some will simply fail to secure any cover at all. They take money ether in cash or by credit card, and send fake documents. The driver is then uninsured, and in the event of an accident could find themselves stung for tens of thousands of pounds.

Others will buy policies on behalf of the driver, but will alter significant details such as the age or occupation of the driver in order to cut the premium. The policy will then be invalid because the details are wrong.

Meanwhile, some may take a payment from the driver and then use stolen credit card details to pay the insurer. Others will take a 'deposit' from the driver by credit card, and then will use the credit card details to run up debts in the driver's name.

The threat

Insurance fraud is a massive and growing problem, which is said to cost the UK £3 billion a year. At the end of last year the City of London set up a unit specifically focused on this problem in order to tackle this booming industry.

Det Supt Bob Wishart of the City of London police told the BBC at the time: "Ghost broking is an emerging threat within the insurance fraud arena, costing the industry millions of pounds, leaving companies exposed and meaning thousands of people are unknowingly uninsured."

Protect yourself

This type of fraud is often targeted at the most vulnerable, those in desperate need of cheaper insurance (such as younger drivers) and those whose English may not be good enough to check the details on the policy.

Protecting yourself from this fraud is a matter of being very careful who you are buying insurance from. Malcolm Tarling, a spokesman for the Association of British Insurers, told the Daily Telegraph: "If you are approached by someone offering cheap insurance or you see an offer that seems too good to be true, then it probably is. If you are unsure if an insurance intermediary is legitimate then check with the Financial Services Authority that they are authorised and registered with the FSA."

You should never buy from anyone who isn't registered with the FSA, and absolutely not hand over any cash to an individual or put money into a personal bank account. Even then you need to be sure you receive a certificate of motor insurance, a schedule of cover and the policy document. This may be a paper copy you receive in the post, or they may give you a web address where you can see your policy and print it off yourself.

If you are unsure about a provider at all, it is best to err on the side of caution - no matter how good a deal they seem to be offering.

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