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Natural disaster claim fraud is a problem for insurers

On Behalf of | Aug 3, 2021 | Uncategorized

Insurance companies have a difficult task to handle. They have to determine who is making genuine claims, how much to pay those people in benefits and manage their holdings at the same time. If they pay out too much, it could hurt the business. If they don’t pay out enough, then people could claim that they don’t meet their contract obligations.

One of the more difficult situations insurers find themselves in is when people claim for natural disasters that may not have affected many policy holders. In fact, natural disaster fraud is such a common issue that FEMA has a full fraud investigations and inspections division.

How could homeowners commit natural disaster fraud?

Homeowners commit fraud when they intentionally lie to get benefits for an event that did not happen or did not affect them as severely as they claim. For example, if a home is no worse for wear after a tornado passes through the area but the owner wants to make a claim for damage caused by another issue, they may file paperwork claiming that the tornado caused damage despite the fact that it was caused by other issues. Tearing down a structure on the property and claiming it fell during a storm or reporting damage to the foundation of a property that was present prior to a natural disaster are both types of fraudulent claims.

Intentionally making a false claim with FEMA takes away money from those who really need it. According to a FEMA report from 2017, those who are caught making fraudulent claims can be charged with a felony, may face up to 30 years in prison and may need to pay up to $250,000 in fines.

Insurers can defend themselves against claims

Insurers who are facing claims that they are not paying out as they should can fight back. False claims made by home and business owners are serious, and insurance agents have to be cautious. There are reasonable solutions in cases where policyholders are claiming bad faith, so it’s important to build a case to defend against those claims and to look into solutions to resolve the problem.