occupancy fraud

SIUs use vehicle location sightings to detect occupancy fraud.

When a surprising number of people report an ambivalence toward insurance fraud, and even view it as a “harmless crime,” it’s easy to see why insurers across all industries continue to grapple with fraud. Take occupancy fraud for instance. You say you are purchasing a home as your primary residence, when you are really buying it as an investment property to flip or rent out. No big deal, right?

Their Gain is Your Loss

Mortgage industry executives say that occupancy fraud is, in fact, a very big deal that adds up to higher risk and lost revenue. Here’s why. It starts at origination; according to industry figures, down payments for a primary residence are much lower, around 3 percent versus a single-family investment property that would require around 15% down. Plus, interest rates on a primary residence are lower too, by a half to a full percentage point lower. Couple significantly lower down payments and interest rates, with the fact that insurers don’t or can’t verify occupancy and you’ve got the perfect set up for bank fraud.

And what about insurers? It’s obvious that occupancy fraud costs them in terms of premium leakage, but the costs go beyond that. If you’ve been following our blogs, you know that much of our testing proves that Liars Lie. If people are willing to commit mortgage fraud, what else will they lie about? How will they maintain their properties? Insurers tell us the Liars Lie adage holds true when it comes to occupancy fraud. These people are more apt to falsify or build-up claims, they leave properties in disrepair and even default on their loans. You have to ask: Are these “liars” the types of people you want on your books?

Fighting Occupancy Fraud

So how does the industry fight occupancy fraud? Some still use low-tech methods like door knocking. Go to the property, knock on the door, and ask who lives there. In addition to door knocking, they employ standard data sources like phone or utility records and driver’s license data. And while these methods can be effective, they don’t paint a complete picture of occupancy, leaving room for improvement. We know that borrowers are betting they won’t get caught, and until now they would have won that bet. Like all industries, the mortgage industry turns to technology for an answer, and this is where vehicle location data also known as vehicle location sightings come in.

Vehicle location sightings differ from telematics. The sightings are gathered nationwide from license plate recognition data and include license plate sightings, along with a time, date and location of the sighting. DRN maintains the most nationwide sightings, over 4 billion, and grows that by over 100 million monthly. Now picture tapping into this vast network of sightings to help establish residency patterns.

Do you see the pattern?

SIUs investigating mortgage fraud need to determine a pattern. This pattern involves two things:

  1. The mortgage loan applicant: Before originating the loan, establish a pattern of occupancy. Answer the questions: Where has this person lived historically? How long did they live there? For example, to qualify for an FHA loan, you have to have lived in your previous residence for 12 months.
  2. A location or address: After making the loan and originating the policy, where does the applicant live? The vehicle location data includes the sighting so you can identify which vehicles are seen at the insured property and connect other people living at the property. If your applicant is claiming occupancy, but their vehicle is never seen at the insured property, it’s time to investigate.

Covered by the Driver’s Privacy Protection Act (DPPA), vehicle location data and sightings help you to establish a pattern of occupancy prior to origination. Once you originate, you can perform license plate OR address searches to develop tips and leads that can help to verify occupancy. Think about these vehicle location sighting searches and their implications for occupancy:

  • Search a license plate to find the most frequent sightings. What pattern are you seeing with the insured’s car? Is it being seen at or near the insured address or is it still being seen at the previous address?
  • Search the mortgage property address to determine plates most frequently seen at that address. If you see a pattern that suggests the applicant’s license plate is frequently seen at an address other than the mortgage property address, and you see another plate at the mortgage property address, you may be onto occupancy fraud.

Vehicle location data helps you to connect the dots and determine whether you may be missing out on premiums or paying claims that you should be denying based on occupancy fraud. The patterns established with vehicle location data give you insights into occupancy fraud, making the case to:

  • Rate the policy at the best rate
  • Deny or approve claims
  • Remove fraudulent customers from your books

DRN’s Event Links, powered by over 4 billion nationwide vehicle sightings plus 100 million more gathered every month, provides SIUs the ability to search by license plate and by address. This SIU investigative platform backs up the searches with detail including:

  • Mapped license plate locations
  • Date and time of plate sightings
  • Plate images
  • Reporting tools

An easy-to-use interface enables quick searches by plate or address, putting an end to door knocking and giving mortgage lenders the tips and leads they need to detect occupancy fraud, fast.

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Download the Liars Lie eBook: Blueprint to Identify Garaging Fraud at Underwriting and Renewals

Eric Nesson

Managing Director, Insurance Solutions
Eric brings decades of knowledge and expertise to the DRN Risk Solutions team. He works to shape DRN’s solutions to align with the practices of insurance claims, SIU, underwriting, and renewal.

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