ARSON FOR INSURANCE
There has been a renewed keenness on the lookout for incidences of fire occurrence lately especially within the last two years. Not only are investigators concerned with the damages incurred in properties and harm on individual lives, they are also very much disturbed by the current reasons of why these so-called ‘burnt’ assets end up in flames. Normally, individuals or group of individuals would do anything to protect their belongings. But during dire times, some people have turned to drastic measures that are none too legal — arson for financial gain.
Arson involves a malicious and intentional purpose of setting on fire things of value such as a house or building, vehicle, business establishment or even animals. These acts are done for various reasons but arson for fraud specifically is carried out to turn in the damaged property for insurance and be able to cash in on an otherwise useless venture or possession.
Arson crimes today have been observed to be steeply on the rise compared to other crimes.
There was a 76% rise of suspicious fires in the state of California alone, for a period of only one year — from 2006 to 2007. But before 2006, there were fewer instances of arson fires (“Will Foreclosure Spark an Arson Firestorm?”). In looking upon figures though, one might see variations concerning the percentage of arson fraud primarily because these crimes are hard to detect. Offences of such kind are created in the first place to be concealed and to go unnoticed, and therefore statistical records could not be said to have exactly determined the number of arson offenses committed. Law enforcement authorities sometimes downplay the figures so as to prevent others from mimicking the offense.
A calculation by an insurance company indicated that about 40% of the fires that occurred were intended for arson fraud (“$10,000 Reward”). The US Fire Administration reports that vehicular fires accounts for 20% of fires caused by arson (Reed, P. “Torch My Ride: Arson for Hire”).
Although this had been seen as a quick and easy way of getting money, some investigators had expressed surprise over such a matter saying that the money collected does not always compensate for the loss. Whether arson for fraud is truly ‘profitable’ or not is still a matter of debate. What doesn’t leave for any point of discussion is the fact that insurance fraud through arson affects everyone.
II. Reasons for Arson Crimes
It has always been common thought that people who commit arson have always one thing in purpose and that is, to collect money. However, this is not often true to all arson fires. The personal background and the issues concerning the individual committing the act would usually bring out the motives behind the crime. However, foremost among all reasons for committing arson is for monetary gain (Manes, 1945, p.35).
Common reasons though, include a wide range of conditions and examples of which are the following:
§ intentions to defraud insurance companies
§ get revenge as a way of expressing anger
§ as mere expressions of vandalism – statistics show that vandalism is the leading cause of arson, mostly done by persons falling below the age of 25. Comparison between arson for vandalism and the motive to collect money shows that the former far exceeds in occurrence, with the latter falling only to 14% as reported by the Insurance Research Council. In 2006, juvenile delinquency accounts for 40.2 % rise of arson cases (“$10,000 Reward”).
§ as a means to cover-up another crime
§ also common where domestic violence is involved
§ it has also been used as a way of escaping a troubled marriage (Bensinger, 2008))
§ crime syndicates or individuals which offers arson-for-hire services
§ mental illness
§ Pyromania, where there is a strong desire or impulse to set an object on fire for mere excitement and self-satisfaction. There is an absence of anger, monetary benefit, or other crimes when the pyromaniac sends something into flames.
§ Done during civil unrest as an expression for one’s political beliefs (“What kind of Impact Does Arson has on Insurance Companies?”)
§ insurance money received through this fraudulent means is used as payment for debts
§ Committed by fire-fighters themselves in search for a ‘hero’ title. They set a property on fire and claim credit for putting it off. Although this would sound a bit strange, it is actually happening (“Fire Accidents: Arson”)
There are also certain situations that provide the ideal set up to commit arson for fraud. Opportunistic arson is not a rare occurrence. For instance, unlike common public perception, the fierce damage wrought by Hurricane Katrina was not only caused by flood water but by fire. Observations over the devastation in New Orleans had revealed that some homeowners became desperate to cash up some money over their insured homes that did not cover flood damages. They therefore decided to ‘compensate’ for the loss by setting their house on fire (“Insurance Fraud”).
Today’s economic downturn, with mortgage houses particularly taking a hard beating, has also created the perfect opportunity for fraud for some distressed, but scheming homeowners. Their frantic approach to escape foreclosure is: by resorting to arson and goes on to report the ‘accident’ to their insurance company with great expectations to walk away with a considerable amount of money instead of facing eviction. About 1.3M properties in 2007 were up for foreclosure and a lot more are estimated to add up to the number (Helfrich, 2008) and common indication of questionable fires is when a house is about to face a few days notice for foreclosure(Golodryga et al, 2008)). Consequently, insurance companies and investigators are up on alert for suspicious fires and bogus claims.
Insurers are given much opportunity to make profit through arson fraud when the true value of the property is so much less than value by which it has been insured. There had been instances when the insurance money collected far exceeds the worth of the property being damaged. Some cases involve owners destroying their properties which they could not otherwise sell, salvaging what little they can have for something that will otherwise be lost.
Fraud often carries ‘padding’ the cost of lost property, claiming items which were not included in the fire or by increasing the original value (“Fraud”). This is common among losing business establishments, where certain goods and items are first removed before setting the area on fire, and yet being claimed for damages in their insurance report. Businessmen are driven by the same reason as individuals who commit arson for fraud, but are much cleverer and knowledgeable and the stakes are much higher (“What is Arson Fraud?”).
Among vehicular fire ‘accidents’, common cause are blamed on high cost of payments which car owners are finding harder to pay. The economic crises have pushed many vehicular owners to extreme illegal measures, often by hiring someone else to do it for them. A fatal combination of purchasing a car on credit which far exceeds what they really can afford, plus the steep rise of gasoline prices tempts some people to make arson as the easy way out from their financial hardships.
Some incidents of arson reports landlords, who found difficulty in evicting delinquent tenants, turned to arson as the answer for their predicament (Laura, 1981). It is quite astonishing how certain situations could lead people to make very poor decisions that bring harm, danger and massive cost on lives and properties.
III. Who Commits Arson for Fraud
As varied as the reason for causing arson, so do the people who get involved with this crime. This includes crime syndicates, professionals, and ordinary people. There should be serious attention given to address the problem concerning juvenile delinquents who sets properties on fire, usually unintentionally. Although this group of people do not set a fire for fraud, the damage still brings grievous costs.
Although arson is a criminal activity, not all people who resorted to defraud through insurance money had previous experience with breaking the law. Some are ‘good’ people with ‘good’ professions (Claxton, 2000). A certain teacher in for example, burned her barn with her horse inside, and proceeded to collect $30,000 from her insurance company (The Associated Press, 2008). Another case involved a man who faked his death, with his wife who served as an accomplice by collecting the insurance money. They used it to pay-off their debt and purchased some more properties. Although both cases were initially successful, the law did catch on them. Another uncaught man bragged about his ‘profit’ by claiming to have collected $45,000 for insurance money for a rundown house that was slightly repaired but was originally bought for only 5K (“Question”).
Compared to arsons committed by people who do it for mere excitement, arson for fraud is likely to create a repetitive pattern while the latter would be more random in manner.
IV. Cost and Effect
Arson is a grievous crime, it victimizes everyone. It causes consumers to pay higher insurance rates, as well as straining the budget and human resources on law enforcement agencies. Losses have already amounted to a 17% rise in 2006, with $905 million worth of properties being estimated to have been damaged, both directly and indirectly by arson. The lists include residential and business properties, churches and vehicles.
More than the monetary loss, arson is accountable for harming and claiming millions of lives in America — causing many untimely deaths of civilians and fire-fighters. It is cruel, hazardous, expensive, and downright selfish. It is appalling as to what extent certain people would do to get money and to what it would cost them. A man staged the burning of his house by leaving his own mother in the basement to make it look ‘real’.
What certain individuals or a few group of people gain or profit from it, is a measly amount compared to the damage it brings to everyone else. These useless burnings brings other harmful side effects, such as contributing to environmental destruction ((Love, 2008).
In short, arson costs money, the environment and priceless human lives.
V. Law Enforcement and Insurance Companies
Since the early start of the insurance industry’s history in the 17th century, fraud was already present. But it was not until the 1980’s that law enforcers began to give serious efforts to counter insurance fraud. What appears as a slow development was caused by various factors: focus of law enforcers was more centred on other priorities, and many were hesitant to push through any training for fear that the public would perceive it as unsupportive towards consumers and mere insurance company tactics to harass rightful claimants.
But changes had to be imposed due to soaring price increase on insurance payments together with the rise of fraud made by organized criminals. This precipitated the formation of different bodies to investigate and determine insurance fraud as well as the creation of other counter-measures to discourage the rise of insurance fraud, examples of which include:
§ Fraud Bureaus – is a branch under state insurance whose chief function is to collect necessary information for documentation that will provide the evidences needed for litigation process where questionable practices had been made (Insurance Information Institute, 2008).
§ Fraud Academy – created by the FBI, NICB, International Association of Special Investigation Units along with the Property Casualty Association of America, to train investigators on the proper detection of possible foul play.
§ Coalition Against Insurance Fraud – a non-government and non-profit organization designed to fight insurance fraud
§ State Legislation – either facilitate or hamper the prosecution of insurance fraud. The passing of the Burned Motor Vehicle Reporting Law in 1987 had caused a significant drop in vehicular arson since it requires the owner to submit a report that has been duly inspected and approved by the fire department.
Arson indeed is a menace to society and must therefore be eliminated as much as possible. But certain circumstances had come up, particularly the economic crisis which has brought a rise on criminal offenses, instead of bringing it down. Perhaps, a number who had gotten away with the crime had encouraged others to do the same. Although arsonists and would-be-arsonists believe that their crimes will go undetected, law enforcers are quite knowledgeable about finding out the true origin of a fire outbreak. Accelerators can be identified scientifically or by means of animals.
Furthermore, what should also be given due notice is the fact that many of those who had been found out were arrested because of the cooperation of civilian witnesses, who had given substantial evidence and lead over cases which would otherwise have gone unnoticed.
Although law enforcers and other civic organizations hold the bulk of responsibility of cracking down crimes for insurance fraud, every individual must be taught the value of holding responsibility to report and refuse cooperating with those who plan or had executed arson fraud. The innocent should never be made to suffer from other people’s crime. Sending fraud and arson offenders to jail can saves other people’s lives and resources.
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