5 practical ways you can keep yourself safe from financial and insurance scams

Over the last couple of years, fraudsters have taken advantage of pandemic uncertainty to con thousands of people out of their hard-earned money.

Data from UK Finance, the organisation that represents UK banks and financial services, has revealed that, in the first six months of 2021, nearly £754 million was stolen through fraud and scams. This represents a 30% increase on the same period in 2020.

From impersonation scams to phishing, criminals are coming up with ever more inventive and sophisticated ways to deceive you. So, with scams on the rise, here are five things you should look out for, as well as some ways you can keep your money safe.

Be careful of insurance scams

According to a report in the Independent, cold-calling firms are pressuring vulnerable people into taking out insurance cover for appliances which, in some cases, they don’t even own.

Scammers sell insurance and hope that victims don’t notice sums of around £10 to £20 leaving their accounts each month by direct debit. Indeed, a survey of more than 1,300 members of consumer association Which? found that nearly a quarter had received unexpected calls about home appliance insurance or extended warranties within the past year.

One of the ways the fraudsters can trick you is to tell you that your existing cover is expiring – even when you may not even have an existing policy in place! 

As with any cold-calling scam, always be wary before agreeing anything if you’re called out of the blue. Ask for a phone number to call the company back, so you can check they are genuine before you pass over any of your account details. 

In addition, figures from Action Fraud also show that many people – often young adults – are targeted by scammers selling car insurance policies which appear very cheap.

Many victims only realise it is a fraud when they come to make a claim, and discover their insurance is not valid or, worse, that they have no cover in place at all.

If you’re unsure about any firm, check the Financial Conduct Authority (FCA) or the British Insurance Brokers’ Association websites for authorised insurance brokers. You can also check whether your vehicle is insured on the Motor Insurance Database website.

Do your research

The key rule is that, before you commit to any financial transaction, do your research to check the company you are dealing with is genuine.

As above, checking the Financial Conduct Authority register is a good place to start.

Common signs that something might be a financial or insurance scam include:

• The website may not look quite right. There may be additional hyphens in the URL or there could be design or spelling errors on the web pages
• It’s hard to find contact details. If all you can find are mobile phone numbers and PO boxes, be very careful
• The person you are speaking to might be pushy or aggressive
• You may be forced into making a quick decision or be told it’s a time-limited offer
• You are being promised very high returns on your money
• The company are using phrases like “guaranteed”.

Criminals often set up bogus companies that look like genuine financial firms. The website may look real and could be offering insurance or investments that look cheap, or promising high returns.

Always do your research and check that any company you’re dealing with is genuine. The FCA’s warning list is another good way of establishing whether a firm is genuine.

Be careful of crypto

According to 2021 FCA research, around 2.3 million people in the UK own a cryptoasset. However, the regulator found public understanding of cryptoassets is declining, with only 71% of those who have heard of cryptoassets correctly identifying its definition.

Of those who were aware of consumer warnings about buying cryptoassets (such as bitcoin and ethereum) on the FCA website, only 43% of people said they were discouraged from buying as a result of the warnings.

As crypto edges towards the mainstream, it can be easy to be scammed. This is especially true if you don’t really understand what you are investing in or you’re taking tips from social media (more on this in a moment).

To combat increasing crypto scams, the government is planning to expand financial promotion regulations so that crypto firms must meet the same advertising standards as other regulated firms.

The rules will mean the promotion of qualifying unregulated cryptoassets, such as bitcoin, must adhere to the same standards that financial promotions, such as stocks, shares and insurance products, are held to.

So, while regulation may help you to ensure you don’t lose your money to fraud, be careful of all crypto promotions in the meantime.

Don’t trust everything on social media

According to a survey in MoneyAge, under-25s are more likely to turn to social media for financial advice than pay a professional adviser.

The research found that 9% of respondents aged 18 to 24 said they would use social media – including TikTok, Twitter and Instagram – for financial advice.

While social media has many benefits, the co-founder of the firm who commissioned the research, Anthony Morrow, called it the “Wild West of investments”.

He added: “There’s little or no regulation and an explosion of misleading and inappropriate investment information that puts followers in real danger of losing their money. 

“Because many influencers don’t follow the same rules as regulated firms around including risk warnings in all their investment information, some followers might think that not having warnings means it’s less risky, when usually the opposite is true.”

To combat increasing social media misinformation, three social media giants have agreed to change the way they manage adverts in order to tackle online scams.

Twitter, Meta (previously Facebook), and Microsoft have all committed to introducing a revised advertising onboarding process. This will require UK regulated financial services advertisers to be authorised by the Financial Conduct Authority.

Consequently, any advertiser regulated by the FCA will need to be pre-authorised by the regulator before promoting any financial products targeting UK users.

Mel Stride MP, chairman of the Treasury committee, welcomed the move. He said: “For too long these companies have turned a blind eye to the criminality at play behind these scams.

“Legislating against these pernicious scams is the only way to stop ever increasing numbers of people from falling victim to economic crime.”

Speak to an expert

If you want to access your pension fund, generate a good return on your investments, or benefit from high-quality insurance then it’s easy to be duped by scammers offering attractive schemes.

Fraudsters have become increasingly sophisticated in recent years and it’s sometimes difficult to spot a scam – even if you’re a seasoned investor.

One way that you can avoid falling victim to a scam is to work with an expert.

For example, I’m Insured is authorised and regulated by the Financial Conduct Authority and you can find us the Financial Conduct Authority register under reference 534183.

This authorisation means you can be sure that we’re a trusted and regulated provider, working with some of the UK’s leading insurers.

If you’re seeking pension or investment advice, then you may also want to consider speaking to a financial adviser or planner. These individuals have taken a series of exams and are qualified and regulated to provide you with advice.

If you want low-cost life insurance, Critical Illness cover, or income protection, please get in touch with one of our experts. We can help you find the right cover at the right price and avoid becoming the victim of an insurance scam.