By Denise Johnson | March 19, 2014
In the last 12 months, Kraig Palmer he has seen rental car schemes “rise faster than any other auto fraud trend.” Palmer, an investigator with the California Highway Patrol, describes this fraud as a multilevel crime, committed by opportunistic drug addicts and sophisticated street gangs.
He recounted his experiences at the recent Combined Claims Conference in Orange County, Calif.
People engaged in this type of crime use multiple fraudulent or stolen identities and targets rental car companies by renting multiple cars, according to Palmer. They then use the rented cars to commit crimes. The cars are eventually recovered, typically burned out or with significant collision damage.
A fraudster can purchase stolen identification, including credit cards and drivers licenses, for as little as $50. In this case, Palmer said the identification had been stolen from a purse two years prior to the crimes being committed.
Palmer handled one case involving 103 vehicles. Most of the perpetrators involved in the scheme had extensive criminal backgrounds. A number of them were on parole, probation or on an early release program. He said that case resulted in 72 arrests with 52 cases related to gang activity (72 percent).
This type of crime is growing because there is a certain sense of security when committing fraud and it’s harder to investigate, the CHP investigator said.
Palmer investigated another case that involved three main suspects who rented 42 cars from two different rental agencies. Interestingly, one was a preferred access customer. The incentive programs that most rental companies have make it much easier to rent a car. Oftentimes, one can go online and register for the incentive program and get accepted without ever stepping foot into a rental agency.
He said it is only a matter of time before insurers will see claims involving fraudulently rented cars.
The investigator said that criminals, even in gangs, are taking time to educate themselves.
“They will know your [company’s] processes as well as you do,” Palmer told insurance company claims professionals.
He said the criminals and gangs are cartel-connected and have access to a lot of money, enough to pay a disgruntled employee to gain knowledge of the claims process.
He advised claims adjusters and special investigative unit (SIU) investigators to scrutinize auto property damage or auto bodily injury claims involving rental cars. Adjusters should look for a pattern, including how long the vehicle was rented, how many vehicles were rented by the same individual and if there were more vehicles rented by the same individual that sustained damage.
Palmer said that working with rental agencies on suspicious claims could prove difficult because rental locations won’t have the information needed. He suggested claims investigators reach out to the regional security manager who has access to the complete contract and credit amount. Due to privacy regulations, law enforcement will likely need to be involved if an investigation includes contacting credit card companies.