Contractor fraud can account for as much as 10% of NAT CAT losses

Dishonest contractors preying on homeowners in the wake of a disaster can account for as much as 10% of annual natural catastrophe losses paid by the U.S. insurance industry, according to the National Insurance Crime Bureau (NICB), which is highlighting the stat as part of annual Contractor Fraud Awareness Week (May 22-May 26, 2023).

In 2021, insurers paid out $92 billion in catastrophe claims. Of that sum, $9.2 billion went to post-disaster fraudsters, according to NICB. These costs eventually trickle down to consumers, adding hundreds of dollars to annual home insurance premiums.

“From hurricanes to floods and everything in between, these events are often scary and life changing,” David J. Glawe, president and CEO of NICB, said in a release. “But what makes these events even worse is what happens afterward as homeowners affected by these natural disasters are targeted by dishonest contractors. Often before the flood waters recede or rescue operations are complete, unscrupulous contractors prey upon individuals who are at their most vulnerable. Before hiring anyone, call your insurance company first. If you didn’t request it, then you should reject it.”

To help policyholders avoid less-than-reputable contractors, the NICB offers the following additional tips:

• Be wary of anyone knocking on your door offering unsolicited repairs to your home.
• Be suspicious of contractors who try to rush you, especially on non-emergency or temporary repairs.
• Be on the lookout for change order fraud, which can happen when a corrupt contractor submits fraudulent change orders to increase the work price or extend a contract without your permission.
• Do not believe a contractor who says they are supported by the government. The Federal Emergency Management Agency does not endorse individual contractors or loan companies.
• Never sign a contract with blank spaces. A crooked contractor could alter after they receive your signature.
• Never pay for work upfront. Always inspect the work and make sure you’re satisfied before you pay. Most contractors will require a reasonable down payment to start but do not pay anything until you have a written contract.
• Avoid paying with cash. Use a check or credit card instead as this creates a record of your payments to the contractor.

Related:

• Florida contractor arrested for lack of workers’ comp, licenses during state of emergency
• Business rules alone are not enough to fight insurance fraud
• When the contractor kinks the water supply line