How is Arson Handled by Insurance Companies?
Arson is simply defined as the act of intentionally burning someone’s property. It’s estimated that a quarter of the fires in the U.S. are intentionally started, and 75% of these arsons happen outdoors. In addition, over a half million arson fires are started each year.
Cases of arson are well documented and categorized in the United States. Arson is also one of the fastest growing crimes in the United States. In addition, statistics show that it is also one of the highest priced crimes committed. Here are some statistics that are well known:
- Age of Arsonists – Just over half of all arsons started in the U.S. are committed by people under 18 years old.
- Low Conviction Rate – It’s estimated that only 16% of arsons end up with the suspect being arrested. Then, there is only a two percent conviction rate of those that are arrested.
- Not a Victimless Crime – Arson kills at least 700 people annually in the United States. It can also cause financial and mental strain for those affected.
- Very Expensive Crime – Arson costs over two billion dollars each year.
So, How do Insurance Companies Handle Arson?
In today’s struggling economy, more people are filing phony insurance claims with the hope of making a quick financial gain. Unfortunately, fraudulent insurance claims cost hard working Americans billions of dollars in revenues each year. When people file insurance claims after committing arson, it can cause insurance companies to raise their premiums.
Insurance companies understand the importance of gathering and sharing arson information that is already available. When handling arson cases, they use computerized databases that list every claim that is larger than $500. They also keep their arson investigators, underwriters and claims adjusters up-to-date with the most advanced training in fraud detection and arson laws.
Investigation for Insurance Fraud
Unless a fire investigation report lists natural causes, such as lightning, as the cause of a fire, arson is always investigated as a possible cause by insurance companies.
Investigation for insurance fraud takes time. However, there are those, who believe they have outsmarted authorities, because they weren’t arrested immediately. The reality is that the fire department, insurance companies and law enforcement are highly skilled at detecting arson, and it is usually just a matter of time before arsonists are eventually arrested. Committing arson for insurance fraud makes it more likely a person will get caught.
The biggest part of an insurance fraud investigation is to determine if a fire was caused by nature, accidental, or if it was set intentionally. In cases of arson, insurance investigators need to work quickly and methodically to get enough evidence for arson, and therefore, deny a claim.
Investigations should include:
- Statements from Witnesses – Investigators need to properly document each witness statement. Witness statements should be taken immediately, because the information will be more reliable. People’s memories fade over time. Their statements can also be influenced; the longer it takes.
- Police and Fire Reports – These reports contain valuable information for insurance investigators. It’s possible to obtain these reports when investigations are complete or inactive. Online background checks and reports are available for the individual, who is making the claim.
- Fire Location – The site where the fire occurred should be examined thoroughly. Videos should be made, and photos should be taken for documentation, and diagrams should be drawn. Copious notes should be taken, too.
- State Statutes – Most states provide immunity of civil liabilities to insurers who cooperate with investigators in regard to fraudulent claims by the insured. Occasionally, the insured will use tactics saying that an insurer slandered and falsely accused them of a crime. They try to insinuate that federal authorities and the insurer are involved in some type of collusion against them.
Statutes also provide a way for investigators and insurance companies to share their information. They have the ability to look at each others case files, which further assists in their investigations.
- Company Records – By going through the histories of premium payments, underwriting records and other related company documents, it’s possible for insurance companies to uncover related information that will help their cases.
- Examination – This should be done under oath to the insured person. It’s best for the insurer to use legal counsel from the very beginning to make sure that the examination is done legally.
Examinations under oath are carried out during the final stages of an insurance investigation.
What Insurance Covers and Pays
The amount of insurance coverage that is paid out depends on different things. An insurance policy might pay out the actual property value, or it could only pay out the replacement value of the property. If it’s based on replacement value, the payout could depend on the appreciated or depreciated value.
It should also be known that most policies have coverage limits. Some have clauses based on the increase or decrease in the value of the home, too. The amount that must be paid by the insured depends on the type of policy that you have, and if it allows for lower rates, depending on what is installed in your house. For example, if your house is equipped with sprinkler and fire alarm systems, you might pay a lower premium that people, who don’t. It’s always necessary to read the fine print on insurance policies. You should learn what kinds of fires are not covered in a policy.
Of course arson is not covered by any insurance company. However, policy holders should not allow insurance companies to bully them around and refuse them coverage, because the company might suspect arson. Arson needs to be proven before insurance companies can refuses to pay. If a company still doesn’t want to pay, the policy holder should seek legal assistance.
For your fire and smoke damage restoration needs, contact NuBilt to get expert help and immediate mobilization.