Glossary of Vehicle Insurance Fraud
/ Crime Terms
ACT Committee: Anti-Car
Theft Committee. Committees established by insurance industry and law
enforcement in a number of states, to deter auto theft and vehicle insurance
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 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 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 support for law enforcement and other organizations
to develop and run programs aimed at preventing auto theft and vehicle
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
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
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 model. --See Cloned Vehicles --.
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
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
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 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 use.
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 carrier.
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
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
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
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 premium
Paper Accidents: To cover the cost to repair existing
damage, vehicle owner contrives a fictitious accident and files an insurance
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 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 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
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
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
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.
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 vehicle-related crimes.
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
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
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 be found. 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 certificate. The
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