Insurance companies are very good at looking at the person associated with a claim or an underwriting variable but just as there are bad people, there are bad cars, and investigators need to know how to find them.
That was the message Chris Whipple, insurance representative for Red Mountain Technologies, delivered to attendees at the International Association of Special Investigation Units last week in a workshop entitled, “Discovering Compromised Vehicles and VINs.” Along with his co-presenter Jamye Carpenter, also with Red Mountain Technologies, Whipple described a compromised vehicle (for instance, a flooded car), a compromised VIN (one that is cloned, counterfeited, or taken from salvage), and then explained what some of the different types of techniques and tools adjusters and investigators can use to discover them.
“Cars have been rebuilt or in some way compromised are on the road for fraudulent reasons,” said Whipple during a pre-presentation interview. “We hope attendees get a further understanding of the different types of fraud associated with vehicles so they can better recognize it when it’s presented to them. We also hope they have a better understanding of the databases available and how complete these reports have become.”
During the session, Whipple and Carpenter examined each database in terms of where the information is pulled from as well as looked at the benefits and faults of each one (see below, What a Difference a Database Makes). He said that SIUs and underwriting departments can use these reports to discover vehicles that should not be paid full value on a claim because the car’s value is inaccurate. Whipple said that it can also provide a head’s up on a potentially fraudulent claim.
When asked about the effect of the “Cash for Clunkers” program on vehicle fraud, Whipple said that the cars are supposed to be crushed within 180 days. The U.S. government has promised to release the vehicle data for the more than 700,000 vehicles turned in, and the information will be added to database reports.
“The vehicles should be destroyed, but you and I know that if you take a $5,000 car off the road, have someone buy it for $200 and then sell it again for $5,000, there is a real incentive for those vehicles to get back on the road. It’s a potential problem.”
Besides insurance implications, there are other disturbing facts related to insurance fraud. Whipple began the session with some sobering statistics that reinforced the severity of the problem.
“Most people [outside the industry] think insurance fraud is a victimless crime,” he said. “But most do not realize that half of the 40 highjackers on 9/11 used insurance fraud to support themselves. A lot of SIUs don’t know that. There’s another case in which cars were being shipped to and sold in Russia, and the money was being used to attack school children in the country of Georgia. It’s because of examples like this that I take insurance fraud very seriously. There are people who die from this.”
What a Difference a Database Makes
Whipple and Carpenter explained the four different types of databases that investigators can use to detect compromised vehicles and VINs. Below are the advantages/disadvantages to each.
? State Databases: Easily available for states that have them, but they do not cross check between all 50 states and some only keep information for 5-7 years. Report can only be requested by owner/insured.
? ISO/NICB Database: Easy to obtain and includes some insurance loss information, but need to be a member, which can be costly. Does not cross check state or private source data.
? NMVTIS: User-friendly format and includes partial insurance total loss information, but only 38 states report to it, older vehicle information may not be kept, and insurers only report current model year plus four previous years.
? Private Industry Databases: Easy to obtain information, cross-checks state databases and included public and private data, reports number of owners and accident data, but they cannot provide names or personal information.