Trust, But Verify

Fraud is everywhere – and you may be paying for it in your Insurance Premiums

Here’s a fraud example that drives your premiums up.

Out of the thousands of claims submitted each year to Georgia Farm Bureau claims representatives, most are legitimate and are undisputed.  However, the National Insurance Crime Bureau estimates that 10% of all claims contain some element of fraud.   This can range from obvious acts of fraud, staged accidents and intentional fire losses, to claim padding where the party is trying to cover a deductible or upgrade their property.

On July 17, 2013 an insured had just returned home from a family cookout to find the Fire Department was at the house. The insured called in and reported that lightening had stuck the home and caused the fire.

A Sr. Special Investigator was notified of the incident and while on scene determined the fire scene did not match the description of the loss reported by the insured. An Origin and Cause (O/C) Investigator was hired to examine the scene and determined there were separate fires set simultaneously in the master bedroom and living room and found evidence of gasoline in the fire debris.

The insured was asked to participate in an Examination Under  Oath, a formal proceeding during which an insured, under oath and in the presence of a court reporter, is questioned by an insurance company representative.  It was discovered that the insured had fell on hard times as the residence was void of utilities and that the electricity was shut off for nonpayment three weeks before the fire occurred.  The insured was laid off in 2012, at the time owing $95,000 on their 2001 Mobile home.   The insured was unable to stay current on their mortgage even after recent refinance and foreclosure proceedings had begun as Mr. Insured’s unemployment benefits ran out just prior to the fire. As the examination went on, it was determined that Mr. Insured arrived at his mother-in-law’s house fifteen minutes before the neighbor called to notify them of the fire.

SIU’s investigation determined the insured had motive, the fire was incendiary and the insured had the opportunity to set the fire.  Based on these facts Georgia Farm Bureau disclaimed coverage to the insured’s claim based on the Intentional Act and Misrepresentation Exclusions located in the policy.

Whether brought on by opportunity in a claim to make a few bucks to cover the deductible, hard times, as in this scenario or by an organized crime ring. Insurance fraud is never a small crime, nor is it victim-less. The common attitude that insurance companies can absorb the loss leads to large financial losses that affect everyone’s insurance rates. Fraud – all policyholders pay when a few cheat.

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