The National Insurance Crime Bureau (NICB) has said that casualty insurers paid out between $4.6bn and $9.2bn extra in 2021 due to insurance fraud.
The NICB estimated that disaster fraud adds 5-10% to the total claims paid following a disaster. Similarly, the Federal Bureau of Investigation found that of the $80bn in government funding for reconstruction following Hurricane Katrina, insurance fraud may have accounted for $6bn or about 7.5%. The cost of this, said the NICB, is often borne by policyholders through increased premiums.
David Glawe, president and CEO of the NICB, said: “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. 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.”
The NICB said that the cost of fraud is contributing to increasing insurance costs nationwide. In Florida, for example, contractor fraud is one element contributing to increasing premiums, insurer insolvency, and consumers scrambling under deadlines to find an insurer to meet mortgage lender requirements. In some instances, homeowners in Florida are signing with non-admitted insurers.
