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Glossary of Vehicle Insurance Fraud Terms:
Agent: A person or business that is empowered to act on behalf of others.
Anti-Fraud Bureaus: Government operated agencies dedicated to
detecting, investigating and deterring insurance fraud. Fraud 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
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
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. In 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 each year.
Cloned Registration: A stolen vehicle that bears a “replacement” tag
obtained by using bone-fide registration information obtained without
the vehicle owner’s knowledge.
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, but not
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 Theft].
Duplicate Vehicle Frauds: Schemes to defraud an insurer using
documentation [VIN and title] from a vehicle of the same year and
Duplicate Title Fraud
EPA Label: Designation commonly used for the Federal Motor Vehicle
Safety Standard Certification Label, which is located on the 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
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
Fraud: Deceit or trickery for gain. In the context of vehicle insurance
fraud, a theft of illicit scheme perpetrated for profit by defrauding an
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 roadworthy,
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 odometer reading.
Owner Give-Up: The intentional abandonment or destruction of an owned
or leased vehicle, which is then reported stolen to collect from an
insurance carrier. 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
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 highend,
high cost, vehicles are used. In states with mandatory preinsurance
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 of work.
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
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 cost.
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
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 company.
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
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
Scam: As related to vehicle insurance fraud, a fraudulent scheme devised
to defraud an insurance company.
Scapegoat 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
Soft Fraud: A term frequently used to describe subtle mis-statements and
erroneous information provided to insurance carriers. Also referred to
as “fudging”, 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 vehicle’s occupants.
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.
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