About 20,000 drivers have paid out for fraudulent car insurance, says insurer Axa.
The crooks advertise online or in local papers to trap unwary drivers in a scam worth millions every year.
Some policies are falsified documents, while others are real policies obtained by misrepresenting the driver’s details to an insurance firm.
Police confirm the problem is so rife that a specialist unit to investigate the crime is being set up.
Det Supt Bob Wishart of the City of London police said: “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.
“This new criminality is particularly prevalent in motor insurance, with fraudsters looking to capitalise on what is a compulsory and sometimes costly product.
“We will soon have a new police unit specifically to tackle insurance fraud.”
BBC Radio 5 has also investigated ‘ghost brokers’ and alleges an 18-year-old student from the Midlands, was quoted £4,000 to get insurance on a Ford Fiesta. A friend introduced her to a ‘ghost broker’ who offered cover for £2,000 with a down payment of £700 in cash followed by monthly instalments of £70.
“We met behind some flats and he pulled up in a dodgy car and I was thinking: ‘I am not giving him £700 of my money right now,'” she told the programme.
She paid the £700 – then the next payment was taken from her bank, but it was for more than £70.
Later, she found out the ‘ghost broker’ had lied about her details to the insurer, claiming she was aged 48 with a five-year no-claims bonus and a driving instructor.
Axa estimates about 20,000 motorists are driving on fraudulent policies.
Steve Gaywood, head of counter-fraud at Axa, said: “We all know car insurance premiums have risen in the last couple of years. Some unscrupulous individuals are using this as a hook to con people into buying insurance that isn’t valid.”
For an online insurance broker you can really trust visit Quoteline Direct