Complete national statistics do not exist, but existing figures suggest a huge problem that it is getting worse. Reports to Insurance Services Office, Inc. (ISO) show an increase of up to 20% in the value of equipment thefts every year since 1996 and show theft as the most common cause of loss for heavy equipment – over 50% of all causes of loss. Inland Marine theft losses alone reported to ISO in 2000 were over $127 million. Some national surveys have suggested that the total figure could be as much as $1 billion each year in losses and indirect costs, such as rentals, downtime, wasted management time and project overrun penalties. Perhaps the most worrying statistic for owners and insurers is that as little as 10 – 15% of stolen equipment is ever recovered.

Why is equipment stolen?

The answer is simple. The reward for the thief far outweighs the risk taken. Heavy equipment often has little physical machine or site security, is valuable and is easy to sell. The low recovery rate is a clear indication of the low risk for a thief. If an item is recovered, an arrest may not be made. Where an arrest is made, a conviction may not be secured. Even where a conviction is secured, the penalty is likely to be light.

Why is so little equipment recovered?

The best way to explain this is to compare equipment recovery to that of autos. The FBI’s Uniform Crime Report for 2000 gives the national stolen auto recovery rate as 62%. The difference in recovery rates is less surprising when certain key factors are considered, such as the timeframe of theft discovery, the availability of accurate data, the complexity of equipment identification and the nature of the used-equipment market.

Theft Discovery

The first problem in equipment recovery is the time lapse from theft to theft discovery. A car theft will be discovered hours, if not minutes, after the crime. An equipment theft on a Friday night might not be discovered until Monday morning. Equipment owners with larger fleets or multi-site operations may not discover the theft for days, weeks or, in some cases, months. This gives the thief a ‘window’ of opportunity when any investigation by law enforcement will not find a theft report. This is a particular problem because suspicious activity such as moving equipment at a strange time of day or on ill-suited transport is most likely to occur during this ‘window’. The gap between autos and equipment widens further when the availability of data is considered.

Data

If an officer stops a car in suspicious circumstances, even if the theft has not yet been reported, the true owner of the vehicle can quickly be determined. This cannot be done for heavy equipment, as there is no mandated registration system for off-road equipment.

The next problem occurs when the theft is discovered. There are a number of hurdles to a ‘successful’ equipment loss report that do not exist for autos. Without registration or title documents a theft victim may not have a record of the Product Identification Number (PIN) or serial number, which is the key information needed to recover the equipment. If the owner has a PIN it may be a shortened version such as that on a warranty card or bill of sale that may not be a unique identifier. As there is no standard format for the numbering of heavy equipment (a standard format has been agreed for earthmoving equipment but will take many years to implement), data entry error is common and there may be confusion as to whether to file the loss as an ‘article’ or a ‘vehicle’ in national police or insurance computers. The internationally standardized 17-character auto Vehicle Identification Number (VIN) has an algorithm that checks the validity of the VIN; this cannot be developed for non-standard PINs - indeed it is difficult for the officer or adjuster to even confirm that the equipment ever existed. Even when an accurate PIN is reported there is still the risk that the owner is reporting the wrong item because, unlike most auto owners, equipment owners may have a number of similar pieces. Whatever the reason, an incorrect PIN renders the loss report almost useless.

Difficulty of Investigation

To identify a piece of equipment requires a level of expertise that increases with certain types of equipment and the degree of sophistication of the thief. Even equipment that has not been ‘disguised’ may have the PIN many different places, some harder to find than others, with many other ID numbers of parts and attachments to confuse the issue. Officers cannot be expected to have this level of expertise, especially given the low priority of this ‘victimless’ crime. Officers know from experience that equipment investigations are time-consuming and often lead to nothing but frustration and are therefore, understandably, reluctant to get involved in such investigations. By contrast, the placement of VINs on autos is standard and the level of training in auto theft investigations is high and well funded. It should also be noted that physical and, to some degree, legal access to autos is generally easier than for equipment on worksites.

Used-Equipment Market

The lack of due diligence in the used-equipment market is in stark contrast to that for autos. When buying a car, title documents are exchanged and services such as Carfax® offer full vehicle histories. Until 2002, nothing like this existed in the used-equipment market. This is a key consideration for a thief in assessing the risk of getting caught. If stolen equipment can be sold with impunity, not only does this reduce the risk of detection but it also allows stolen equipment to be sold at, or close to, market price.

NER has been established and developed to focus on and solve these challenges.

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