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FraudSmartSM
CATASTROPHE FRAUD
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What Is a Catastrophe?
To insurers:
A catastrophe is a single incident, or series of related incidents, causing insured property losses totaling more than $25 million
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Total Insured U.S. Losses Due to Catastrophes Since 1999
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Risks We Face Floods occur in all 50 states and US territories At least 50 million homes may be located in counties at
significant risk for earthquakes On average, 5 hurricanes strike the US every 3 years Wild-land fires Tornadoes affect almost every state 65 active or potentially active volcanoes exist in the US Landslides occur in every state Technological or man-made hazard like nuclear
accidents or consequences of terrorism Loss of life and property resulting from fire far exceeds
that of all other natural disasters, combined
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Most Costly Insured Catastrophes
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Highest Insured Catastrophe Losses
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Tornadoes in USA
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Most Costly Hurricanes
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10 Most Costly US Earthquakes
Year State Property Damage
1994 CA (Northridge) $15,300,000,000 1989 CA (Bay Area) 7,000,000,000 1971 CA (San Fernando) 553,000,000 1964 Alaska 500,000,000 1987 California 358,000,000 1992 CA (Southern) 92,000,000 1992 CA (Southern) 66,000,000 1952 CA (Kern County) 60,000,000 1933 CA (Long Beach) 40,000,000 1983 CA (Central) 31,000,000
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EARTHQUAKE FACTS:Risk and Insurance Issues
39 states in this century have experienced damage from earthquakes
90% of Americans live in seismically active areas
25% of homeowners in California have earthquake insurance
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After a Disaster…
There is a simultaneous, massive volume of large complex claims
Claimants are under extreme pressure
Insurance companies are under pressure to settle claims quickly
Exceptional media coverage exists
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Working Conditions
Lack of telecommunications No office or temporary office May not be from local area No accommodations No utilities
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Claim Volume
Northridge earthquake - 430,000 claims
Hurricane Andrew - 161,711 State Farm claims alone
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Cat Fraud Indicators and Scams
Fraudulent claims appear for theft, breakage or water damage due to non-disaster coverage.
Items claimed are not available for viewing because the items are “stored with friends”.
Many collectors do business out of their homes and claim goods under their homeowners’ policy.
Medical claims show up later from “friends” visiting during the disaster.
There are no carpet indentations from claimed items.
Claimed items would not fit into the available floor space.
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Cat Fraud Indicators and Scams
There is no debris from claimed items. Renters making claims as owners. Owners claim rental contents. Vacant rental property claimed as a residence
with the missing contents claimed to have been thrown out.
Agents/adjusters requesting and receiving referral fees.
Property is fully insured, but victim still applies for and receives an SBA loan or FEMA grant.
Claims denied due to a lack of coverage are re-submitted after the coverage is purchased.
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Cat Fraud Indicators and Scams
Back to back disasters where unrepaired damage from the first disaster is claimed again in the second.
Recycling inventories from house to house, (secure debris before it can be passed on).
Relocation and moving expenses claimed - claimant never moves or claimant rents from self.
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Contractor & Provider Indicators Do not maintain a local office or have a local phone number. Doesn’t have proper identification. Are not able to provide references. Want “cash” or payment up front. Contractor asks for a large cash down payment. Have inadequate equipment to perform the job. Arrive at the loss site without being solicited. Offer below market prices that are “too good to be true”. Offer cash incentives to get the job. Estimate is very general….Lump sum. Is reluctant to provide a written contract specifying the exact
work, costs, supplies and start/completion dates. Are not bonded or are under-insured and are not licensed or
are newly licensed. Beware of repair personnel who claim to be certified or
affiliated with any state or federal emergency program.
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Do not let your catastrophe
become a disaster
Do not let your catastrophe
become a disaster
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CAT FRAUD
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