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July 9, 2024

When fraudsters arrive, what can false pretense coverage do for your dealership?

Learn about the latest false pretense trends and examine proactive strategies that help protect your business.

Summary

Deception is a strategy criminals can use to get the upper hand on unsuspecting people. It can take many forms, such as phishing emails from cybercriminals or identity theft through stolen personal information.

Whatever form, deception is a significant risk facing today's workforce. One method potential "customers" use in automotive dealerships is the false pretense scheme. 

What are these schemes, and how do they impact auto dealers? More importantly, what can your business do to protect its vehicles from these activities?

What is a false pretense scam?

Since 2019, vehicle thefts have steadily increased in the U.S. In 2023, there were 1,020,729 vehicle thefts–a one percent increase from 2022. Criminals can steal a vehicle in various ways. They can acquire vehicles through physical break-ins, gain access to wireless key fobs, or engage in false pretense scams.

Selling and buying vehicles plays a major role in keeping auto dealers' businesses running. Prospective fraudsters can pose as customers or suppliers to try and enter the transaction cycle.

False pretense scams use false information, such as fake names and social security numbers, to create seemingly legitimate customer profiles. Criminals can use someone's stolen identity to make a purchase in their name or create a fake identity out of thin air. The latter method is known as synthetic identity fraud. 

Synthetic identity fraud is growing in popularity. According to a 2023 Point Predictive report on auto lender fraud trends, synthetic identity and identity theft have risen 45% since 2018. Whichever form these false pretense scams take, each helps a criminal illegally buy or sell a car. Ultimately, auto dealers find themselves with less cash or fewer vehicles on hand.

Artificial intelligence (AI) is another innovation that can potentially be utilized in false pretense schemes.  

How can AI play a role in false pretense schemes?

AI can help businesses improve efficiency by accessing data to track sales, purchases, and customer buying habits. It's also gaining popularity thanks to its ability to create images, videos, and voices. However, criminals are using this advancement to their benefit.

In auto dealerships, fraudsters can utilize AI to help with false pretense plans. Customers' and employees' voices can be replicated to initiate and complete vehicle transactions. According to AI research conducted by McAfee, someone can use three seconds of audio to clone your voice with nearly 95% accuracy. These fake voices can lead to real consequences for victims. McAfee's research notes that 77% of people targeted by AI voice scams lost money.

A bright note is that today’s auto dealers hardly face consistent AI-powered false pretense scams. Nevertheless, keeping tabs on where AI is heading as a tool and threat will be essential. As the World Economic Forum predicts, by 2026, nearly 90% of online content may be synthetically generated. Verifying purchases and conversations with clients and employees is one step your business can take to stay ahead of AI-savvy criminals.

How can you prepare your auto dealership for false pretense challenges?

Protecting your automotive dealership from false pretense scams starts internally. Getting false pretense insurance is vital if your business has ever dealt with an attack. Even if you haven’t experienced this, that doesn’t mean your business is clear of the threat. 

The power of this type of auto theft is that it can start small. Maybe one incident involves a single vehicle. However, if the criminals feel confident and remain undetected, one stolen or compromised vehicle can lead to more thefts later.

Understanding and analyzing customer and employee transaction details goes a long way in protecting your business. Even when deadlines are tight, don’t feel rushed to hand over the keys before double-checking that all transactional information is legitimate. When preparing your business for false pretense scams, you should:

  • Confirm that your bank has received the funds for a transaction.
  • Make sure your insurance policy includes false pretense coverage.
  • Run necessary credit checks.
  • Train employees on the concept of false pretense scams.
  • Verify the accuracy of multiple forms of identification (e.g., application information, social security number, date of birth, etc.)

Are you ready to upgrade your false pretense coverage?

Get false pretense protection to help reduce your security risks. Marsh McLennan Agency helps you create strategies and implement procedures personalized to your needs.

We’ll review your current false pretense practices to identify areas where your team excels and where there’s room for improvement. Determining what your organization needs takes more than a phone call. We help facilitate in-person safety visits between you and your carriers to ensure we understand the risks you face daily.  

Beat false pretense fraudsters at their own game. Meet one of our specialists today to learn how our false pretense insurance can protect your business.

Reach out to a consultant today.

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