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Spot Fraud in Your Books with Two Easy Indicators

Every carrier’s book of business is filled with fraud. There are often easy hints that can be used to identify them. To my surprise, carriers often overlook these red flags, which ends up costing them in the long run.

So, what are the “overlooked” identifiers? They’re the well-known, easy to understand, potential fraud indicators that consistently show up in a carrier’s book of business, such as PO Boxes and out-of-state registrations.


Identifying Garaging Fraud with PO Boxes

PO Boxes show up in many insurance carriers’ books. When a PO Box is a rural route PO Box, then the client is highly likely to live at a rural address. However, if a PO Box is an urban or suburban address, then you have to question where the vehicle is actually located. We have seen up to 10% of a book having PO Boxes that were urban addresses instead of rural routes. While there may be many reasons why urban addresses are used, when we look at vehicle sighting data, we discover they do not represent where the vehicle is typically garaged. In most cases, we find that the PO Box address is in a lower risk area compared to where the vehicle is actually located, leading to high risk for carriers. This is an easy red flag that indicates potential garaging issues.

Checking Out-of-State Registrations Can Help Fraud Identification.

Out-of-state registrations also strike me as red flags and can cost policyholders money if not caught. When I began working at DRN, I always assumed that carriers confirmed the registration state, but that wasn’t the case. I soon found out nearly all carriers we worked with forgo asking for the license plate, never mind the registration state.

In order to identify potential garaging fraud issues, DRN first created a VIN-to-license plate “match” process to accommodate the lack of license plates in a carrier’s book of business. This process allowed us to receive the state of registration along with the license plate number.  Armed with this information, we have seen upwards of 10% of their book are of vehicles with out-of-state registrations. I know that people move and do not immediately change registrations; however, we find many instances where the garaging address was in one state while the vehicle was registered and garaged in another with just a glance at the book. Many of these turned out to be garaged in high risk locations while the policy address was in a low risk location. Simply matching the vehicle registration to the policy address provides a strong garaging indicator.

You have the evidence. DRN can get you more.

You do not need DRN to help you catch these red flags, considering they are already in your book and can be easily identified. But, there are still many types of fraud in your books that aren’t so readily apparent. We want to help you identify and predict these losses by using the vehicle location and condition data that we collect. Happy Hunting!

About the author:

Eric heads DRN’s Risk Solutions business development and strategic partnership efforts, shaping DRN’s solutions to align with the practices of insurance claims, SIU, underwriting and renewal. Eric brings more than 25 years of insurance industry experience and expertise to the DRN, including the launch of the Banking and Insurance Division of CARFAX. During his 10 years with CARFAX, he also earned the distinction of being one of five team members listed as patent-holder for the “use of automotive historical data within the insurance underwriting and rating process.”