What You Need to Know About Insurance Fraud

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A several months ago, there was an article about the president of a New Jersey roofing company who was convicted and jailed for committing insurance fraud. We all know that insurance fraud happens, but what’s really upsetting is how “normal” insurance fraud has become in our society. Stories like this are regularly told at different industry events. In fact, there seems to be one or two guys in every community who spoil it for the rest. Insurance fraud is so prevalent and rampant that it has become a business in itself, and some even build their business model around it. Here are some startling statistics:

  • The Coalition Against Insurance Fraud estimates that a total of about $80 billion in fraudulent claims are made each year in the United States.
  • According to the Insurance Information Institute, fraud accounts for about 10 percent of the property/casualty insurance industry’s incurred losses and loss adjustment expenses each year.
  • The FBI estimates that between 3% and 10% of the health care industry’s annual expenditures in the United States are due to fraudulent activities, amounting to a cost of about $70 billion.

Insurance fraud costs a lot of money…and everyone pays. Unfortunately, the problem is that those who do not actively participate in insurance fraud have to pay for those who do. I know I would be upset if I found out my neighbor purposely damaged his property just to get that new deck he wanted, or tore up some shingles to get a new roof. Our insurance rates would not be as high if people made moral and right decisions. When damage is fabricated, or estimates inflated, or even when deductibles are waived, it hurts not just the local community but the entire industry. Insurance premiums have increased an average of about 16% over the last 10 years partly due to insurance fraud. Fraud affects healthcare costs for families and employees, insurance payments on homes and businesses, insurance premiums paid for policies, and time spent investigating fraudulent claims rather than looking into legitimate claims. According to a study by the Coalition Against Insurance Fraud, more than half of insurers suspect that fraud has increased. That says either more people are committing insurance fraud or insurance carriers and criminal justice departments are becoming more aware and increasingly aggressive in fighting potential insurance fraud. An educated guess is the latter is likely the case.

As it stands now, insurance fraud is a crime in all 50 states, yet strangely only five states require mandatory photo inspection reports for automobile claims. As of today, only seven states do not have state fraud bureaus. These agencies are tasked with fighting fraud on both a large and small scale but luckily, they are not alone in their efforts. It is mandatory in 21 states for insurance carriers to have their own fraud divisions and that number continues to grow as the demand increases for more protection against those committing insurance fraud. We know full well that those people who continue to break the rules and look out only for themselves will suffer. They will have to look for new scams or new ways to deceive because as more resources go toward insurance fraud, fewer people will be able to break the law.

GAF understands that associating with the right individuals will only strengthen the industry and weed out the ones who want to game the system. GAF Master Select™ and Master Elite® Contractors are regularly scrutinized on adequate insurance commitments,  possess a strong commitment to their community, keep up with employee and sub-contractor training, have satisfactory customer service, and maintain up-to-date installation requirements and product knowledge.

The days of fraudulent overestimating claim amounts, manufacturing false damage, misclassification of employees, or inadequate repairs will continue to diminish due to rising levels of scrutiny and the high contractor standards that manufacturers (like GAF) are promoting.



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  1. Mark Henderson

    I agree with what has been said. This is an epidemic in our business and has become a “dirty” business. My business was started in 1986 and my grandfather had his business for 50 yrs. I have seen a lot of transition, and it is in its worst state now. The manipulation of insurance and its fraud is disgusting and in the end homeowners are the ones that pay. I have many discussions on this matter and what could be done and the same answer comes up, nothing. I feel that it lies in the lap of the homeowner, to do there homework. The “deal” is usually not. Certified installers and Master Elite installers, which our company is, will help the homeowner with suggestions that will bennificial to there needs not to cheapen the system that protects there home.

  2. John Edward Bert

    Common in our area (Dallas, TX) is the practice of covering deductibles on insurance work.

    Low end contractors, that often omit the replacement of valuable roof accessories, offer to do the job for homeowners at the after deductible insurance price. While there is nothing wrong with competitive pricing between contractors, these discounts only work with the aid of false documents that conceal the discount from the insurance carrier. Without that fraudulent invoice, the homeowner can not recover the depreciation on their claim.

    Lower priced contractors should drive down the price of claims helping all insured, but this does not happen when that savings is used to fraudulently cover deductibles. It also hurts contractors like ourselves who don’t get the job. Consumers are hurt with low quality jobs when they could have received a roof with a Systems Plus Warranty installed by a quality certified GAF Contractor.

    John Edward Bert
    Bert Roofing Inc.
    Dallas, TX 75228

    GAF Certified Contractor


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