Criminal Misuse Of Rental Vehicles Is A Costly Cross-Border Problem

For many, renting a vehicle provides a means for conducting business, going on a road trip, moving to a new location and so forth. For some, however, a rental vehicle is an object for theft, a device for fraud or other criminal activity.

Insurance Bureau of Canada (IBC) estimates fraudulent insurance claims are worth $3 billion each year, with auto theft adding $600 million more. In the United States, the Federal Bureau of Investigation says staged accidents cost insurance companies more than $20 billion annually. The National Insurance Crime Bureau notes that staged accidents are becoming one of the leading insurance frauds in the United States.

While it is not clear how many criminal cases involve rental vehicles, consider that if just 10 per cent of crimes involve rental vehicles then it is a $360 million problem for Canada and a multi-billion dollar in the U. S. Add the cost of police response and investigation, health care and administration and judicial process,

and it becomes transparent that crime involving rental vehicles has a tremendous impact on a society’s bottom line.

Complicating the problem for investigators are organized criminal groups that operate between the provinces and the United States. Law enforcement and insurers both north and south of the border are working together to combat the costly menace.

Thieves steal rental cars to resell them to other criminals or to strip them for parts. They may steal them to resell them to unsuspecting buyers or to black market brokers for shipment overseas. Criminals use stolen vehicles to commit other crimes, including drug trafficking, transporting stolen goods or insurance fraud.

More dangerous than thefts are accidents staged to commit insurance fraud. Well-organized groups use a simple approach: Criminals rent a car, buy full insurance coverage, load the vehicles with paid accomplices as “passengers” and then intentionally cause an accident with an unsuspecting or distracted driver. There are several types of staged accidents. The most common include the following:

Swoop and squat: This type requires two drivers and their vehicles and an unsuspecting motorist. The “squat” driver positions his car in front of the victim, while the “swoop” driver passes in front of the squat car, which causes him to slam on the brakes, causing the victim behind them to crash into the rear of the squat driver’s vehicle. The victim has no time to swerve or slow down. The driver of the swoop car who caused the accident keeps going, leaving the victim’s insurance company to pay for the accident. All personal injury and damage claims made by the driver and passengers in the squat vehicle are the victim’s responsibility.

Panic stop: A driver has a rental vehicle full of “passengers” with one them on the lookout for distracted drivers. As soon as this occurs, the passenger tells the driver to slam on the brakes, causing the distracted victim to hit the suddenly stopped vehicle. The victim is totally at fault, especially since he was “distracted.”

Drive down: A collision is staged at an intersection or parking lot entrance after yielding the right-of-way to the innocent victim by waving them ahead. As the victim proceeds through the intersection, the suspect purposely accelerates and collides with the victim’s vehicle.

In these incidents, the innocent victim is shocked and possibly hurt. They may not realize what just happened, and have no idea that they are being victimized by criminals. In the meantime, the “passengers” complain of serious (and hard-to-prove) back and neck injuries. Approaching sirens wail, confusion and concern cloud the judgment of the victim.

Motivated by greed, criminals who stage accidents can unintentionally cause serious tragedies. This is especially so when the staged accident occurs on a highway. Many criminals believe that “the faster the victim is going, the more damage will be done” to the squat car and the larger the claim. They can misjudge the consequences for their accomplices in a car slammed from behind. Rearend collisions may push squat cars into oncoming traffic or in front of other speeding cars. In fact, an innocent 71-year-old New York woman died in 2003 when her car hit a tree in an intentional rear-end collision. More recently, a California family died in a fiery crash after criminals purposefully struck their car from behind.

Law enforcement, governments and insurance companies in Canada and the U. S. are on the offensive in an effort to apprehend these criminal groups. Many states and provinces have passed laws and regulations that target staged-accident rings. Some have also formed special task forces, dedicated the resources of prosecutors and others to combat the problem.

In 2005, New York prosecutors indicted 85 people in what they said was a multi-billion dollar accident fraud operation with connections to Russian organized crime groups. Last October, 70 companies and individuals in Florida were sued by an insurance company for more than $1.5 million in damages. It was alleged that 17 car accidents were staged and insurance claims were made by an organized ring that included auto body shops, tow-truck companies, chiropractors and people posing as drivers and passengers.

Insurance professionals play an important role in stopping this kind of criminal fraud. Experts say there are a number of indicators and red flags that warrant additional investigation by claims professionals. They include the following:

• Insurance theft rings use both cars and trucks.

• The vehicle driven by the plaintiff may have pre-existing damage. Damage to the vehicles may be inconsistent with the circumstances or description of the loss; in some cases, damage seems the result of running the vehicle into a stationary object.

• The renter will have purchased an excessive amount of insurance coverage. The rental vehicle is more than likely the at-fault vehicle.

• The renter pays in cash or tries to use someone else’s credit card for the transaction. The renter is not always the driver and may not even be in the car at the time of loss.

• There are usually multiple occupants in one or both vehicles. The occupants may not produce identification, and when questioned, deny knowledge of the other parties involved. The parties often have aliases or nicknames. The occupants rarely know the complete names of the other occupants. They provide cell phone numbers, incorrect addresses or post office box numbers.

• Destination details, description of the accident and other details change, alternatively, details and descriptions appear too exact or scripted.

• There is usually no ambulance called to the scene and no injuries claimed at the scene. At times, the loss is a one-car accident or involves a phantom vehicle.

• Medical facilities serving the “injured” passengers provide multiple diagnostic imaging/testing for subjective soft tissue injuries, or multiple assessments. Their reports arrive late. The facilities’ billing seems unclear or confusing; they double bill, bill for treatment not rendered or for excessive treatment for alleged injuries.

Using these flags, those who work in the insurance industry can be on alert and can lend our eyes and ears to identify suspicious claims. Bringing concerns to proper authorities has and will lead to larger investigations, apprehension and prosecution of organized criminal groups. Cooperative effort by those on the front line with law enforcement and government is necessary to attack the problem, reduce its tremendous financial and human costs and protect us all from becoming victims.

Philip Wayland is director of insurance replacement for Avis Budget Group in Canada.