Vehicle fraud could be costing insurers up to 20% of profit (and they don't even know it)

We've spoken before about how VIN gaps can affect risk assessment and lead to premium leakage. Today we want to discuss vehicle fraud and how it affects insurance carriers.

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vehicles on the road today are incorrectly classified as personal instead of commercial.

What is vehicle fraud?

A vehicle identification number (VIN) can tell much of a car, but this same transparency we've relied on for years has given fraudsters an opportunity to make a profit. Criminals are tampering and masking the vehicle's true identity, allowing them to offload troubled cars as if they were clean. This is what is commonly referred to as vehicle fraud or VIN fraud.

What kinds of vehicle fraud are there?

Fraud can take different forms; it can be small, performed by just one individual with the goal of getting a cheaper insurance fee, for example by changing their true ZIP code. It can also be done on a higher scale, with criminal organizations importing stolen vehicles and putting them in the market with false identities.

The top vehicle frauds are:

• VIN cloning
• Misclassification fraud
• ZIP code fraud

VIN cloning

VIN cloning is stealing the VIN number of a clean vehicle and attaching it to another car with the same brand and model to hide their complete history. Last year in Canada there were 372,000 potentially cloned VINs. That's more than double the figure recorded in 2024. Measures are being taken at the government and law enforcement level, but this topic needs to be addressed by all the players in the field, including insurance companies.

Misclassification fraud

Your agents are about to close the deal, but they forgot to ask about the use of the vehicle. Turns out, instead of a personal vehicle, it's one that would be used to deliver flowers, or do carpentry work. The problem is that you learn that on a claim, and you end up spending in lawyers when you could've avoided it doing an early accurate check of information on the quoting process. Besides the legal risk and cost, these cases end up hurting the credibility of your company, as it will show with more claims and negative reviews to potential customers looking for carriers.

This is just one case of misclassification. Others can include:

• Branded titles
• Salvage title
• Title washing
• Lease status

Each one of these can be understood as a different vehicle fraud, but they have the same root cause, classification and information not being accurate.

ZIP code fraud or garaging fraud

A person says the car is in a rural area in New Jersey to get a cheaper quote, when the reality is that the car is in New York City, where accidents, theft and liability are higher. The result? You get less premium, while paying higher losses. It might seem small, but once you scale it, it can seriously hurt your business. Imagine you have 1,000 of these cases, polluting your data sources, then your estimations are also wrong, and it leads to a domino effect. But even if your information is clean, if it happens to your competitors, then it can indirectly affect your margins too, when they're charging cheaper prices based on false figures.

Avoiding vehicle fraud before issuing policies

All of these could pass under your radar in underwriting or quoting and only surface on claims. If fraudulent claims represent up to 20% of your book of business, even modest leakage can translate into millions in avoidable annual losses.

This is not the underwriter or agents' fault; they're doing their due diligence with the information they have handy. That's where the problem is: the information they have is fragmented or inconsistent. They're making a diagnosis based on an X-ray, while they should be doing it with a data rich MRI.

Benjamin Murdoch, Product Management at Mobility Global explains, "By having more accurate data at the VIN level, you can turn a common fraud blind spot into an operational advantage, improving loss ratio performance while reducing downstream investigation and claims handling costs."

What risks could you have caught earlier?

Many of these risks only become visible when a claim happens. But what if the signals had been available when the policy was quoted or underwritten?

Having a more complete view of the vehicle at the VIN level can help your underwriting and risk teams identify inconsistencies earlier — before they turn into premium leakage, unexpected loss exposure or additional claims investigation.

VIN Status Check adds vehicle status and title history intelligence across all 50 states, giving insurers additional signals to help validate the risk they are evaluating without adding friction to the quoting process.

What does a more complete view look like?

Our VINtelligence data combines build-level vehicle data with key VIN Status Check signals, giving you a clearer picture of the vehicle behind the VIN—that full MRI your team needed. Instead of waiting for these signals to surface at claim, see what this additional visibility could uncover in your own book.