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 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 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
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
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 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
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 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
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
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 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
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
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
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 cheating.
Pre-Existing Damage: Physical damage that
existed prior to the issuance of a motor vehicle insurance
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 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
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 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
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
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.