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How to Tell if Your Insurance Broker Is Legitimate

July 21, 2021
5 mins
An older couple speak with a broker

As consumers, whenever we purchase a product or service, it is essential to keep in mind the Latin phrase “caveat emptor” – let the buyer beware. In essence, it is a principle to follow when buying something to make inquiries about the product or service you wish to acquire, and in turn, be sure you understand what it is you’re purchasing. That general rule of thumb applies to making any purchase, including buying a car insurance policy.

Many consumers go through an insurance broker or insurance agent when buying an auto policy, and there are many benefits to doing so. But it’s in your own best interest to ensure the broker or agent you are dealing with is licensed and authorized to sell auto or property insurance in your province.

Fraud is one of the many factors that affect the cost of auto insurance premiums. Unfortunately, many unsuspecting consumers may be hoodwinked by a dishonest individual or an unlicensed brokerage selling insurance policies fraudulently, as one Toronto woman did last April after she shelled out $6,000 upfront to cover her premium, only to discover a few months later that she wasn’t insured.

More recently, the Registered Insurance Brokers of Ontario (RIBO) and the Financial Services Regulatory Authority (FSRA), Ontario’s car insurance regulator, both issued warnings to the public about the Hidden Ace Brokerage, as it is not licensed by RIBO or authorized to sell insurance products in Ontario. Consumers who purchase insurance from unlicensed entities or persons are not protected under the province’s Insurance Act.

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What happens if the insurance policy you buy turns out to be fake?

In the event you unknowingly buy a fraudulent or fake insurance policy from an unlicensed broker or agent, beyond the fact you’ve wasted your money, potential problems will arise, including:

  • If you have no coverage whatsoever, and you’re involved in a collision, you’ll be on your own to pay for damages to your vehicle.
  • A police officer could charge you for driving without insurance. Should that happen, you face the possibility of an expensive fine and a licence suspension, your vehicle may be impounded, and the conviction will show up on your insurance history and driving record, which will make getting a legitimate policy far more expensive.
  • Your insurance history will also show a lapse in coverage. That, too, can lead to a higher premium.

How to choose a reputable insurance broker

Here are a few recommended tips to help you avoid falling victim to an insurance scam:

  • Check with your provincial regulator to confirm the broker you are dealing with is licensed and in good standing.
  • If you live in Ontario, see if the broker you wish to purchase a policy from is registered with RIBO or find a broker through the Insurance Brokers Association of Ontario. In Alberta, you can find a licensed broker through the Insurance Brokers Association of Alberta.
  • Ask trusted friends and family for their recommendations for an insurance broker, agent, or insurer.
  • Check with the insurance company whose policy the broker is selling to you to ensure the insurer recognizes the broker and can confirm it is one of its legitimate partners.
  • Ensure the insurer’s name on your policy documents or pink slip is the same as the name on the insurer’s website.
  • Beware of insurance premium quotes that appear to be too good to be true.
  • When purchasing a car insurance policy, make payments to the brokerage, not to an individual broker, and ask for a receipt.
  • Never pay a broker a fee to provide you with a quote, don’t send a payment through a wire transfer, and don’t pay for the policy in cash.

What to do if you think you’re a victim of insurance fraud

If you believe you’re a victim of insurance fraud, take the following steps:

  • Report the crime. Don’t hesitate to report fraud to your local police force, Crime Stoppers, the Canadian Anti-Fraud Centre, and through the Insurance Bureau of Canada’s anonymous tip line.
  • Let your bank know. Stop communicating with the fraudster and notify your financial institution and other firms where you have an account that may be affected.
  • Notify credit reporting agencies. Contact Canada’s two main credit reporting agencies – Equifax Canada and TransUnion Canada – and have an alert put on your credit report.
  • Document everything. If you have any correspondence or records of a suspected fraudulent transaction, save all of it, including emails, websites, letters, receipts, contracts, and the contact information the fraudster used to get in touch with you. Document all interactions and subsequent actions you took when you first noticed something was wrong.

Another way to avoid falling prey to insurance scams is to use a free, online car insurance quoting tool to compare policies and premiums from a variety of insurers. It’s also the best way to find the coverage you need at a price you can afford, and all the insurers and brokers that partner with RATESDOTCA are licensed.

Liam Lahey

Liam Lahey is a versatile marketer with experience as a staff and freelance writer for many business and technology publications and newspapers. He previously worked as the editor and media spokesperson for RATESDOTCA, handling home, auto, and travel insurance topics.

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