NICB 2 FraudSmart SM CATASTROPHE FRAUD NICB

NICB 3 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 NICB

NICB 4 NICB Total Insured U.S. Losses Due to Catastrophes Since 1999

NICB 5 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 NICB

NICB 6 NICB Most Costly Insured Catastrophes

NICB 7 NICB Highest Insured Catastrophe Losses

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NICB 9 NICB Tornadoes in USA

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NICB 17 NICB Most Costly Hurricanes

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NICB 20 Copyright © 2002, South Florida Sun-SentinelSouth Florida Sun-SentinelNICB

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NICB Most Costly US Earthquakes YearStateProperty Damage 1994 CA (Northridge) $15,300,000, CA (Bay Area) 7,000,000, CA (San Fernando) 553,000, Alaska 500,000, California 358,000, CA (Southern) 92,000, CA (Southern) 66,000, CA (Kern County) 60,000, CA (Long Beach) 40,000, CA (Central) 31,000,000 NICB

NICB 26 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 NICB

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NICB 30 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 NICB

NICB 31 Working Conditions  Lack of telecommunications  No office or temporary office  May not be from local area  No accommodations  No utilities NICB

NICB 32 Claim Volume  Northridge earthquake - 430,000 claims  Hurricane Andrew - 161,711 State Farm claims alone NICB

NICB 33 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. NICB

NICB 34 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. NICB

NICB 35 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. NICB

NICB 36 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. NICB

NICB 37 Do not let your catastrophe become a disaster Do not let your catastrophe become a disaster NICB

NICB 38 CAT FRAUD