Join host Emma Hancock and Aaron Lee, Senior Director at Ally Dealership Insurance, as they speak about the rising challenges of vehicle theft and fraud. Discover actionable insights and innovative strategies to safeguard dealership inventory amidst a surge in theft claims, providing a roadmap for dealerships to fortify their defenses and mitigate risks in an ever-evolving automotive landscape.
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Emma Hancock: Hi everyone! Welcome back to the All Ears podcast. I'm Emma Hancock with Automotive News. This podcast is sponsored by Ally Financial and produced by the Automotive News Content Studio.
In each episode, we explore topics that are important to leaders in automotive retailing. Our guests include experts in their field from Ally, plus dealers from around the country to offer actionable solutions in our ever-changing industry.
Today, we catch up with Aaron Lee, senior director at Ally Dealership Insurance. We'll be discussing the challenges dealerships face in keeping their inventory and their business secure. The past several years has seen an uptick in dealership car theft, whether its vehicles being stolen during test drives off the lot or through fraudulent auto financing applications, it's an expensive and time consuming headache for dealers.
Aaron, thank you so much for taking the time.
Aaron Lee: Thanks, Emma. It's great to be here.
Emma Hancock: Alright, Aaron. So, according to the National Insurance Crime Bureau, 2023 was on pace to be a record-breaking year for vehicle theft. Overall, Ally's own numbers show a notable rise in theft claims filed by dealerships. What are some of the trends that Ally Insurance has seen related to theft and fraud?
Aaron Lee: Yeah, we've certainly seen an increase in the frequency and the severity or the cost of thefts over the past few years. The most notable increase was in 2020, where we saw a significant increase in theft activity. And what was most notable at that time was this was at a time when the vehicle inventories themselves were going down.
So, we saw a significant decrease in the inventory levels due to the chip shortages and several other factors that were playing into that. And then at the same time, we were seeing this spike in theft activity. So, it was cause for concern. And since that time, we've been spending a lot of time looking into theft and this new trend that we've seen over the past few years.
Emma Hancock: So, given the rise in thefts, Aaron, can you share some tips that dealerships can employ to help them protect their physical inventory?
Aaron Lee: Yes, would love to talk about that. So, there's several things that dealerships can look at implementing in their operations in order to help prevent these types of thefts going forward.
The first one is key control. So, dealers should look into and consider using key machines for all their vehicle keys, the inventory, as well as their customer vehicles. The thieves aren't always just looking for the dealership inventory. The vehicles that the dealerships have on their property that may be in for service from customers are also susceptible to theft as well. So, if they look to use a key machine that is hidden in a locked room without windows and then making sure that they're monitoring activity into and out of that machine so they can keep an inventory of where the keys are at any given time.
Another thing is physical access to the vehicles. So, if they look at the dealer lot and think about if someone were to get on the property and steal a vehicle, can they get that vehicle off of the lot? And if they can, what are some ways that we might be able to prevent that vehicle from leaving the property?
So that's things like fencing, poles or boulders around the property, ram-proof gates are all things that dealers can consider in increasing the physical security of their location. And then for the vehicles themselves, there are things that dealers can consider in helping to prevent a specific vehicle from being stolen.
So, if they have high value vehicles that may be prime targets for theft, they can do things as simple as removing the battery or a fuel sensor or fuses, things to just make it harder for the vehicle to start so that it's less convenient for a thief to be able to access and steal that vehicle quickly.
And then the final thing is immobilizing the vehicles. Some dealers have gone as far as using a boot on certain vehicles to make sure that they can't be moved, or removing wheels from the vehicle, removing batteries, things like that.
Emma Hancock: Really good tips, Aaron. Kind of a mixture of low tech and high tech – it really starts with the key, protecting the key. And then everything from taking off the battery, which I think is an amazing low-tech idea to all the latest technology that you've mentioned. So, Point Predictive says the number of potentially fraudulent auto loan applications rose during the pandemic and is still increasing. Whether it's an in person or remote customer, criminals might use tactics such as stolen or fake IDs or phony pay stubs to acquire a vehicle they have no intention of paying for. What might dealers and their staff do to help identify these fraudulent attempts before they lose a vehicle?
Aaron Lee: That's another great point. What we would call false pretense is certainly on the rise as well as physical theft.
There are things that dealers can think about as they look at how to prevent this from occurring in their store. One of the ideas is to use an ID scanner. So, there are ID scanners similar to when you go to the airport and they scan your ID as part of the security process, there are these types of devices that dealerships can purchase and use in the process of verifying someone's identity.
So, even IDs that may be very well done and look legitimate sometimes these ID scanners have been able to catch that it's a false identification. Another one is doing a little bit more in-depth questioning for customers that they may not know. And then, of course one of the things they should think about is, if a deal seems too good to be true, it might be too good to be true. So, if there's no negotiation on price, if the customer is eager to get the deal done and get out, if they're looking to accept any additional F&I products or anything else that's being put on the deal, the dealer might want to step back and think about what might be going on with this transaction. The overall key thing is encouraging all of the dealership employees to remain curious as they're going through the process and looking out for any kind of red flags that there may be. And the final thing is reviewing all of the paperwork, insurance cards, looking at the dates of those, making sure that they're dated prior to that day or that week.
Not necessarily saying that that's an indication that it's fraud, but just another one of those flags that they can consider in the process. Calling to verify the insurance is a good practice and the pay stubs you mentioned, false pay stubs, reviewing all of the data is a good idea on those pay stubs to make sure there are no inconsistencies such as having the same check number on two different pay stubs is another red flag.
Emma Hancock: Really, really good insights, Aaron. I mean, it is feeling like the new normal, but really like you say, dealers are going to have to consider protecting themselves against some of that. So, Aaron, are there opportunities for dealers to work with finance companies to help minimize the risks of a fraudulent purchase?
Aaron Lee: Yeah, absolutely, I think there are ways that the dealers and the finance companies can work together to combat this threat that we have in the market today. The dealer is certainly the front line of defense against this type of fraudulent activity. And again, doing their due diligence and making sure that everything checks out, remaining curious about the transaction.
And then on the back end, finance companies can be looking for different ways too as they're running credit checks and things like that, to figure out how AI can be incorporated into the process to help identify red flags. And then on the insurance side, I know at Ally Insurance, we have a loss prevention department that helps to work with dealers as needed to provide, again, some of these tips and recommendations, do an on-site review of physical security and things like that. And then we have the same thing on the finance side as well.
Emma Hancock: Well, so many great points here today, Aaron, so many useful, actionable insights, like we said off the top, thank you so much. You've given us some great information. That is it for this episode of the All Ears podcast. I hope everyone found this helpful. I certainly did. On behalf of Ally Financial and the Automotive News Content Studio, thanks for listening, and bye for now.
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