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Glossary of Vehicle Insurance Fraud / Crime Terms
Committee: Anti-Car Theft Committee. Committees established by
insurance industry and law enforcement in a number of states,
auto theft and vehicle insurance fraud.
Agent: A person or business that is empowered to act on behalf
Anti-Fraud Bureaus: Government operated agencies
dedicated to detecting, investigating and deterring insurance
bureaus and insurance company Special
Investigative Units, or SIU’s, work closely with law enforcement and
organizations such as the National Insurance Crime Bureau [NICB], which employ
valuable analysis and forecasting techniques for the detection and prevention
of insurance fraud.
Application Fraud: This type of fraud can occur when a vehicle owner mis-states
information important to obtaining a policy. For example, using the address
of a friend or relative that is closer to their place of work in order to obtain
a lower insurance premium, or railing to include young drivers on the application.
Arranged Arson: The owner of a vehicle, or a second party engaged by the owner,
sets fire to a vehicle in order for the owner to collect on an insurance claim.
ATPA: Auto Theft Prevention Authority. Organizations enacted by legislation
in a number of states that are funded by motorists. They provide the financial
for law enforcement and other organizations to develop and run programs aimed
at preventing auto theft and vehicle insurance fraud.
Auto Auction: Vehicles are sold – in working order, non-operational salvage,
or metal scrap – accompanied by the vehicle’s title and Vehicle
Identification Number [VIN].
Auto Recycler: Recyclers may sell vehicles that an insurance
company has designated as “totaled”, many of which are rebuilt
and resold, while some are dismantled for their parts.
Backdate: To falsely add a date to a document that is earlier than the correct
date for the purpose of deceiving an insurance company.
Bonded Title: The title of a vehicle is bonded during
the titling process when the owner has not yet received proof of ownership.
this case “bonding” refers
to a surety, or protection, against financial loss.
Born Again Vehicle: A stolen or renumbered vehicle that,
through the use of a forged duplicate title, a counterfeit title, a manufacturer’s source
document showing the Vehicle Identification Number [VIN], or the original title
that’s been returned to the U.S. from an illegally exported vehicle,
assumes the identity of a vehicle that’s been exported.
Claim Exaggeration: Overstating an insurance claim or
falsely reporting items stolen from vehicle to make up for the policy’s
deductible. Also known as Claim Padding, this type of fraud amounts to
millions of dollars
Cloned Registration: A stolen vehicle that bears a “replacement” tag
obtained by using bone-fide registration information obtained without the vehicle
Cloned VIN’s: Found on stolen and renumbered vehicles
equipped with a counterfeit VIN that can be found on a legitimate vehicle
of the same make
and model. Through the use of a forged duplicate title application, with
a “transfer” or
Registration Only [RO] transaction, the vehicle becomes legitimized.
Collusion: Pertaining to insurance fraud, this is the act of two or more parties
acting together to defraud an insurance company.
Counterfeiting: In the context of vehicle insurance fraud, this refers to forging,
altering, copying documents without a legal right to do so for the purpose
of deceiving an insurance carrier.
Dismantled Title: When one or more of a vehicle’s primary systems is
damaged to the point that the cost to repair or replace the components exceeds
the vehicle’s fair market value, a “dismantled” title
can be issued, thereby allowing it to be used only for parts or scrap,
to be driven.
Dummy: An imitation or representation of the original.
Dumped Vehicle: A vehicle that is intentionally disposed
of, such as “dumping” it
in a river, lake or swamp and later claiming it stolen. Dumping is often resorted
to when the owner can’t make car loan payments and/or is facing a
sizeable over-mileage penalty with a leased vehicle. [See Staged Vehicle
Duplicate Vehicle Frauds: Schemes to defraud an insurer using documentation
[VIN and title] from a vehicle of the same year and model. [See Cloned Vehicles].
Duplicate Title Fraud:
Label: Designation commonly used for the Federal Motor
Vehicle Safety Standard Certification Label, which is located
driver’s side door post or door jamb. The label includes the VIN number
and other important information about the vehicle.
Export Fraud: An insured vehicle, which has been purchased
or leased, generally with a minimum down payment, is illegally shipped overseas
to be sold. It
is then reported stolen and the criminals – most likely an organized crime
ring – reap large profits from insurance settlements.
Falsified Theft Reports: The owner of a vehicle submits a false claim for
items reported stolen from a vehicle but, in fact, were not stolen, or exaggerates
a claim for items that were actually stolen.
Faked Accidents: An event created to intentionally cause damage to a vehicle.
For example, a vehicle intentionally stops unexpectedly to cause a rear-end
collision with the car behind it. The perpetrator will benefit from the accident
through false medical and/or property damage claims.
Federal Motor Vehicle Theft
Law Enforcement Act: Enforcement Act of 1984, which went into effect
with the 1987 model year. The Act requires the use of standardized National
Highway Traffic Safety Administration [NHTSA] labels on specified new vehicles
and replacement parts. These labels provide valuable information for investigative
Fraud: Deceit or trickery for gain. In the context of vehicle insurance fraud,
a theft of illicit scheme perpetrated for profit by defrauding an insurance
Gray Market Vehicles: Vehicles that do not conform to North American Government
safety and emission standards, and whose value is less than similar models
produced for sale in North America. Vehicles of this type are frequently
involved in fraudulent theft claims.
Hard Fraud: An intentional act committed for the purpose of collecting money
from an insurance company.
Hidden Repair Fraud: Also known as “Inflated Repair Estimates”.
Working in collusion with the owner of a vehicle, an auto body shop inflates
the extent of the damage to cover the deductible. Independent damage appraisals
help to eliminate this type of fraud.
Hit and Run: Owner of a vehicle with existing damage reports
a “Hit and
Run” incident in which the vehicle was damaged.
Insurance Fraud: The act of deceiving an insurance company for profit.
Junk Title: A title issued for a damaged vehicle deemed
not be road-worthy, where the cost of repairing the vehicle is in excess
of its fair market
value, or a title issued for a vehicle declared to be a “Total Loss” by
an insurance carrier in another state.
Mileage Fraud: Misrepresenting the true mileage of a vehicle by resetting
the odometer to a lower setting. [See Odometer Rollback].
NHTSA Labels: NHTSA [National Highway Traffic Safety Administration]
labels, located on different parts of a motor vehicle, identify major component
parts and replacement parts on vehicles designated as “high theft rate vehicles.” Salvage
and replacement parts are also included under the labeling requirement.
Non-Conforming VIN: A fictitious Vehicle Identification Number that appears
to be authentic because of an accompanying counterfeit title.
Non-Manifested Vehicles: Vehicles discovered in cargo containers being shipped
out of the country that do not appear on a shipping manifest. Such illegal
shipments are part of the Export Fraud dilemma.
Odometer Rollback: Resetting the odometer to show less mileage than the true
Owner Give-Up: The intentional abandonment or destruction of an owned or
leased vehicle, which is then reported stolen to collect from an insurance
Owner give-ups are motivated by a variety of reasons including: owner needs
cash, mechanical problems requiring expensive repairs, problems in making
car loan, lease or insurance premium payments.
Paper Accidents: To cover the cost to repair existing damage, vehicle owner
contrives a fictitious accident and files an insurance claim.
Paper Cars: Vehicles that exist only on paper, supported by counterfeit titles
and other falsified documents.
Perpetrator: Individual who commits a crime.
Phantom Vehicles: Also known as “Paper Cars”, “phantoms” are,
in effect, vehicles that exist only on paper for the sole purpose of defrauding
an insurance company. After an insurance policy is obtained, using phony information
as to the vehicle’s existence and identification, a dishonest policy
owner, or in many cases an organized crime ring, will report the vehicle stolen
and file a theft claim with the carrier; to obtain the largest settlement possible,
the identities of high-end, high cost, vehicles are used. In states with mandatory
pre-insurance inspection laws, this scam has been eliminated.
Phony Thefts: Also known as “Owner Give-ups”, the policy owner
either abandons an insured vehicle or arranges to have it stolen, for the purpose
of collecting on an insurance claim.
Policy Misrepresentation: To obtain a lower premium based
on the distance traveled between the insured’s home and place of work, the vehicle owner uses
the address of a relative or friend, which is closer to the owner’s place
Policy Six-Pack Scam: See Multiple Policy Fraud.
Pre-Insurance Inspection: The process of having vehicles physically
inspected by trained inspectors, at designated inspection sites – and in many cases
photographed – as a requisite for obtaining an insurance policy. This
effective fraud deterrent is now mandated in a number of states.
Photos: A series of three [or more] photographs or digital images of a vehicle
that a) proves that the vehicle exists, b) records its condition, and c) shows
the EPA label, which includes the VIN.
Premium Fraud: A term associated with policy owners who provide erroneous or
misleading information when applying for insurance coverage, to influence premium
Premium Retrieval: Submitting a false or inflated claim to
an insurance carrier as a way to recover some of the money that has been paid
for insurance coverage
in the past. Some policy owners feel that since they have a good driving record
and have made no claims for a number of years, they “are entitled to
get some of their money back.” Strange as it seems, some otherwise honest
people do not consider this as cheating.
Pre-Existing Damage: Physical damage that existed prior to the issuance of
a motor vehicle insurance policy.
Property Crime: As defined in the FBI’s Uniform Crime Reports, 22 October
2001, “Property crime includes the offenses of burglary, larceny-theft,
motor vehicle theft, and arson.”
Rebuilt Title: This term is associated with a “Salvage Vehicle” that
has been restored to operating condition, most likely with refurbished parts.
In most states, vehicles of this type must be inspected before it is allowed
to be used.
Red Flag: An indicator of possible fraud.
Reported Crime: Vehicle crime, such as theft, that is reported to a law enforcement
agency. In some cases the crime reported, such as vehicle theft, never happened,
but was simply the first step in submitting a fraudulent claim to an insurance
Ruse: A deception; a scheme attempting to make something appear to be other
than what it is.
Salvage Fraud: Attempt to collect on a fraudulent insurance
claim based on a vehicle that has previously been declared a “total loss.”
Salvage Vehicle: Vehicle with sufficient damage produced by collision, fire
or vandalism, to be declared to be a total loss by an insurance carrier.
Salvage Switch: A stolen and renumbered vehicle bearing the Vehicle Identification
Number [VIN] of a previously salvaged [total loss] vehicle for which a title
was issued based on the title of the salvaged vehicle.
Scam: As related to vehicle insurance fraud, a fraudulent scheme devised to
defraud an insurance company.
Theft: Person claiming that their vehicle
was stolen to avoid the consequences for another offense. As an example,
a vehicle which has collided with and damaged another vehicle
may leave the vehicle
and declare it stolen in order not to be responsible for the damage.
SIU: Abbreviation for an insurance company Special Investigative
Unit which is responsible for investigating fraudulent claims and other vehicle-related
Soft Fraud: A term frequently used to describe subtle mis-statements
and erroneous information provided to insurance carriers. Also referred to
soft fraud can be a crime.
Staged Auto Theft: For a variety of reasons, such as being
behind in car loan payments, in need of case, or over the mileage allowance
on a leased vehicle,
policy owner arranges to have vehicle stolen, or disposes of it.
Staged Accidents: One or more parties collude to cause an
intentional accident to collect on bodily injury or property damage insurance.
Swoop and Squat: A planned accident in which a vehicle [vehicle
1 – the “swoop” car]
cuts in front of a second member of the scam team [vehicle 2 – the “squat” car]
who jams on the brakes, causing the innocent driver behind [vehicle 3] to hit
Vehicle 2. The vehicle that was hit [the “squat” car] will submit
a claim for property damage, and in many cases, bodily injury claims for the
Theft Report Falsification: Vehicle owner falsifies the
value of items taken in a reported burglary to collect from an insurance
company. In some cases
no burglary occurred, in others a burglary took place but the claim was exaggerated.
Thirty-Day Special: A vehicle in need of extensive repairs
is reported stolen and kept hidden for the 30-days needed to process and
collect on an insurance
claim to be processed and paid [time may exceed 30 days]. Some time after
the claim is paid the original owner dumps the car, which may ultimately
During this time the perpetrator of the scam obtains a new vehicle; the original
vehicle, if found, becomes the property of the insurance company.
VIN: Abbreviation for Vehicle Identification Number,
a 17-digit number which is, in essence, a vehicle’s birth
VIN identifies the physical characteristics of each vehicle,
including information about the manufacturer,
year, model, body type, engine, and serial number.
Washed Title: Title based on materially false or fictitious
information, eliminating any previous problems/issues related to the vehicle.