Their argument is that theft is when someone comes and takes your stuff.

Voluntary parting is when you voluntarily hand it to someone, lending or renting, and they fail to return it. Theft on the other hand is called involuntary parting.

Not sure how much of a gray area this is. If I don't return a car from the dealer for a test drive and am caught, I'll be charged by police with theft, not voluntary parting. Likewise with car and equipment rentals.

It seems like the distinction is something that only comes up in the text of insurance policies, and is not an actual legal principle from criminal law.

Police see it as theft and it's a criminal act.

But the contract you agree to defines it as voluntary parting, doesn't cover it, and does cover theft, which never happens and isn't possible on their platform, so they never have to do anything except collect a big share of the rental fee.

Will you actually be charged with theft?

If I don't pay my mortgage, I don't get charged with anything. What's the difference between lending money vs a car/camera etc? I guess it all comes down to intent, but intent is hard to prove.

The thief in this case used a false id, engaged in identity theft, and also robbed another person on the same day.

It's hard to imagine circumstances where any court or jury would fail to find criminal intent in this particular case given those details.

If someone borrows something and then gets lost in the woods and dies, it's not theft because there wasn't intent.

You are correct that these cases hinge on intent.

The distinction almost surely exists because of the ease at which a thief could perform a "voluntary parting" versus a theft. Why would insurance choose to cover something that was actually likely to happen?