Most people don’t think about insurance fraud, yet it does exists and is a problem for insurance companies, as well as you and me. Last week, I introduced this topic by looking at car insurance fraud (see https://wiseinsurancegroup.com/car-insurance-fraud/) using two examples that were in the news. Here, I continue the theme by examining it by looking at fraudulent home insurance claims.
When most people think of home insurance fraud one of the first things they think of is arson. Arson is deliberately setting something on fire, in this case a home. According to the National Fire Protection Association (NFPA), approximately 282,600 intentionally set fires were recorded annually from 2007 to 2011. 18% of these were structurally related, yet they accounted for 92% of fire related civilian deaths, 84% of civilian injuries, 86% of direct property damage. 63% involved residential properties.
Arson usually happens when things aren’t going well financially for someone. One of the interesting statistics that was noted in the D/FW area as the economy improved were lower incidences of arson. There was a spike of arson related cases as the economy imploded in 2008 through 2010, which fell once people’s finances improved starting in 2011. Most people don’t set fire to their home when things are going well financially.
Hail, interestingly, is a common area for insurance fraud. I’ve had the opportunity as an agent to talk with a number of claim adjusters. One adjuster shared with me how an individual had walked on their roof throwing a golf ball at shingles. The person’s action was easily spotted as hail is neither uniform in size, nor does it fall in a uniform pattern on a roof. Needless to say, this person’s claim was denied.
Another source of insurance fraud occurs when a person files a legitimate hail claim, pays the down payment for repairs to be done, but the repairman takes the money and runs. No repairs are made, no phone calls are returned, and no one seems to know where the roofer went. This is why I always recommend hiring local roofers who make a living here and have a reputation of doing it right.
The most common type of hail related fraud occurs when the cost of the work is inflated to cover the deductible so the homeowner doesn’t have to pay it. Similarly, inflating cost to get around the deductible may occur for damages arising from a water leak or a home fire. Fabricating repair bills to make a little extra money are also examples of insurance fraud.
Other forms of insurance fraud around homes include inflating the cost or value of items stolen, or damaged from a lightning strike. In addition, claiming a scheduled item of jewelry was lost or stolen when it wasn’t, not returning the money when the item was found, as is concealing that a residence is used as a rental property or as a commercial business are all examples of insurance fraud.
All of these actions cost each of us. Insurance companies pay an average of $80 billion annually for fraudulent claims. Our premiums, or cost of insurance, would be less if companies weren’t paying for bogus claims. It’s up to each of us to be honest and ethical even when confronted by a roofer who’s willing to waive the deductible on a hail claim. It may mean a little momentary money out of pocket, but if each of us said no, our renters and home insurance will cost less.
What do you think? Share your comments, questions, and experiences with me on my Google +, Facebook, and LinkedIn pages. I’d love to hear from you!