Thousands of young drivers desperate to cut the cost of car insurance could find themselves stuck with worthless policies thanks to a fraudulent new trend dubbed ‘ghost broking’, a type of insurance fraud.

The scam sees fraudsters providing drivers with fake policies at discount rates. Although the driver usually believes their insurance policy is legitimate, they could find themselves in trouble with police for failing to properly insure their vehicle.

The policies can be flogged online, over the phone and even in person by ruthless scammers keen to take advantage of inexperienced drivers looking to save money.

Fraudsters pose as legitimate middlemen able to cut insurance costs. Often, they promote their insurance policies on listings websites such as Gumtree and student websites and university noticeboards.

Ghost broking usually works in one of two ways:

• Scammers purchase policies from legitimate insurance companies on the driver’s behalf but falsify the motorist’s details in order to access a cheaper policy
• Scammers provide the driver with fake policy documents designed to look like they’ve been purchased from a legitimate insurer

Although motorists may be oblivious to the scam, they could face the following consequences:

• The car may be seized by police
• A fixed penalty notice may need to be paid Prosecution for driving with no insurance and possible disqualification from driving
• Valid car insurance will need to be purchased. This cost will be in addition to any money lost on the fake policy

If an accident occurs while driving without valid insurance, the driver may be liable for any damages caused. This could include compensation if someone is injured in the accident.

Malcolm Tarling from the Association of British Insurers advices people to be careful when purchasing insurance. He said: “When buying insurance it’s important to make sure it is from a reputable source.

“If someone approaches you in the car park of your local supermarket, it is probably too good to be true. You don’t need to take a chance to save money because it is a very competitive market.”