Fraud in disaster claims cost insurers as much as $9.2B in 2021
Fraud adds 5%-10% to the total claims paid following a disaster, according to the NICB.
In 2021, property & casualty insurers paid an additional $4.6 billion-$9.2 billion in disaster claims as a result of fraud, according to the National Insurance Crime Bureau (NICB).
The NICB estimates fraud adds 5%-10% to the overall amount in claims paid after a disaster. The FBI found similar results when looking at reconstruction costs following Hurricane Katrina: Of the $80 billion in government funding to aid rebuilding efforts, insurance fraud accounted for $6 billion, or about 7.5%.
“Disasters can bring out the best in people as they rush to help those in need. Unfortunately, disasters can also attract predatory contractors looking to defraud and deceive disaster victims,” David Glawe, president and CEO of the NICB, said in a release. “After most disasters, these shameful contractors use well-rehearsed, predatory practices to exploit stressed disaster victims when they are most vulnerable. As a result, survivors pay these bad actors who do little or no work.”
Fraud is also contributing to increasing insurance costs across the U.S., according to NICB, which noted contractor fraud is one element contributing to the property insurance crisis in Florida.
One of the best ways to fight insurance fraud, particularly when it involves deceitful contractors, is through consumer awareness, according to the NICB. To this end, the bureau offers the following tips to help policyholders identify fraudulent contractors:
“NICB agents, along with our law enforcement and insurance partners, are on the ground immediately following disasters looking for fraudulent contractors,” Glawe said. “However, we need disaster victims and the general public’s assistance in identifying these unscrupulous players.”
This news comes in advance of NICB’s Contractor Fraud Awareness Week, which will run May 23-27, 2022.
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