Preventing Sophisticated Car Insurance Fraud

A recent discussion revealed a global car insurance fraud exploiting lax verification to insure cars online and then steal them. This has led insurers to adopt stricter measures like multi-factor authentication.

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A recent discussion with one of our customers highlighted a sophisticated global car insurance fraud where criminals exploit insurers' lax verification processes. The fraudsters insure cars online without ID verification, report lost keys, and either tow the vehicle or recode the keys to steal it. They also damage the car to necessitate towing, gaining possession through these means. This scam has been identified in multiple countries, including the US, UK, and South Africa, prompting insurers to implement stricter verification measures using data from credit bureaus. FRISS suggests enhanced defenses like multi-factor authentication, biometric verification, cross-checking details, and stricter key replication policies. Additionally, insurers should verify towing requests, educate policyholders on proper claims procedures, and use network analytics to detect fraud. These measures aim to balance robust fraud prevention with maintaining a positive customer experience.

A recent discussion by our very own VP of Sales EMEA/APAC, Ariane Braam-Verkoren, with an insurer highlighted a concerning global fraud scenario that organized networks are leveraging against insurance companies worldwide. 

Here's how the scam unfolds: 

The criminal selects a car from a parking lot, then insures it online through a provider that doesn't require ID or ownership verification. Shortly afterward, they report lost keys, prompting the insurer to either tow the vehicle to a chosen location or send a locksmith to recode the keys, enabling the criminal to drive away. When they discovered that some insurers don't offer key replacement, they adapted by puncturing the car's radiator to mechanically damage it. Their goal in this case is likely to have the vehicle towed to another location, thus gaining possession of the car. 

Claims with a similar modus operandi have been identified in countries such as the US, UK and South Africa, where these criminals exploited the lack of stringent verification processes by using fictitious information to facilitate car thefts, staged accidents or using towing operators to uplift accident damaged vehicles to their towing yards where they hold these vehicles ransom until the insurer pays for the release.   

Throughout this process, nobody checks if the person reporting the loss or damage is the rightful owner of that car.  

As a result, insurers in these regions have implemented stricter policies and verification processes to confirm insurable interest. They leverage data from credit bureaus during the application process to verify customer information. This functionality is also available in other countries, especially in Europe, where similar data sources are utilized to enhance the accuracy and security of the insurance application and claims processes. 

Here’s how insurers can bolster their defenses, with assistance from FRISS: 

Identity Verification 

Multi-Factor Authentication (MFA): Require the person reporting the loss or damage to provide both a driver's license and a photo ID. 

Biometric Verification: Implement biometric verification methods, such as fingerprint or facial recognition. 

Secondary Contact Method: Verify the claim by calling a registered phone number or sending a confirmation message to the policyholder's contact number. This step ensures that even if fraudsters capture the contact details, the rightful policyholder is notified. 

Policyholder Verification 

Cross-Checking Details: Use FRISS technology to cross-check the person’s details against insurance records, ensuring they are the registered policyholder or an authorized individual on the policy. 

Alert System: Create an alert when the person reporting the claim is not listed in the policy information. FRISS scoring or identifiers can highlight discrepancies in contact details. 

Ownership verification: Requires the policyholder to provide proof of vehicle ownership when the policy is initiated. Alternatively, this verification can be facilitated through technology and data sources that automatically confirm ownership details. 

Strict Key Replication Policies 

Authorization Checks: Implement protocols requiring key replication requests to be authorized by higher-level officials within the insurance company. 

Call-Back Procedure: Establish a call-back procedure to the registered owner using a verified contact method. 

Manufacturer Key Replacement: Ensure that keys are replaced only through car manufacturing dealers, who are required to verify the owner's identity. 

Physical Presence Requirement: Mandate the physical presence of the car owner for key replication. If the owner cannot be present, require a notarized authorization. 

Towing and Repair Protocols 

Pre-Authorization for Towing: Verify towing requests through additional checks, including direct contact with the registered owner and confirmation of incident details. 

Secure Towing Contracts: Partner with towing companies that have strict identity verification protocols. 

Damage Verification 

Independent Assessor: Have an independent assessor verify reported damages before authorizing repairs or towing. If damage appears self-inflicted or malicious, initiate an investigation. 

Customer Education through Awareness Campaigns 

Claims Procedure Education: Educate policyholders on the importance of following proper claims procedures to prevent unauthorized claims. 

Verification Steps Awareness: Ensure policyholders are aware of the verification steps the insurance company will take to prevent fraud. 

Online Claim Registration: Advocate for the use of online claim registration processes that require login credentials, enhancing security. 

Network Analytics 

Watchlists and Network Analytics: Implement watchlists and network analytics to identify and monitor suspicious activity patterns and uncover organized networks. 


These fraud scenarios highlight significant vulnerabilities in the current claims processes. Other trends such as claims of lower value, which often go undetected due to the thresholds set by insurers in straight-through processing, can also highlight a significant vulnerability.  Organized crime syndicates make use of these vulnerabilities and find their ways to fraud the system. By implementing stricter verification protocols, leveraging advanced technology, and educating policyholders, insurers can significantly reduce the risk of such frauds. This always needs to be in balance with the disturbance it might give honest customers who are in need of support. Collaboration with FRISS will provide the technological backbone to support these enhanced measures, ensuring that identity verification, network analytics and real-time checks on fraud scenarios are robust and secure without impacting the pleasant customer experience. 


Written by Dennis Potgieter

Sponsored by ITL Partner: FRISS

ITL Partner: FRISS

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ITL Partner: FRISS

FRISS is the leading provider of Trust Automation for P&C insurers. Real-time, data-driven scores and insights prevent fraud and give instant confidence and understanding of the inherent risks of all customers and interactions.   

Based on next generation technology, the Trust Automation Platform allows you to confidently manage trust throughout the insurance value chain – from the first quote all the way through claims and investigations when needed.   

Thanks to FRISS, trust is normalized throughout the organization, enabling consistent processes to flag high risks in real time.


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