Internet search queries for “how to set fire” are spiking amid the downturn from the coronavirus pandemic, which experts say is a sign that some people may be planning to commit insurance fraud.
Search term data compiled by Google shows that the number of users looking for information on how to start a fire grew by 125% year-over-year in the last week of March. A massive 700,000 jobs were lost during the month.
“This is creating a lot of economic hardship where people are going to look and say, ‘Can I save my business? Can I save my home? Do I really need this car?’ Some percentage of those consumers may unfortunately turn to, or consider, arson as an opportunity to rectify their financial problem,” Matthew Smith, executive director of the Coalition Against Insurance Fraud, told the Washington Examiner. “We saw this coming out of the Great Recession, where there was a spike in claims, whether that involved homes, businesses, or automobiles. No one has the perfect crystal ball right now, but there’s every indication that we could the same or worse coming out of COVID-19.”
Smith described a scenario where consumers or business owners feel “trapped and like they’re going to lose their life savings if they are not able to meet their financial obligation,” either because they’ve lost their jobs or because consumer demand has slowed. “So they look at their insurance policy — what’s called the declarations page. There’s a big number there, probably a larger number in many cases than what they actually sell the home or the business or the automobile for in terms of its value,” he said.
Smith added: “So the decision is made, unfortunately, to try to burn and get rid of the property or the vehicle so that they can use that insurance payment for more pressing financial needs.”
This level of shutdown, Smith said, is notably hard on small businesses, especially restaurants and bars.
Insurance companies are highly attuned to the potential for fraud, but risk experts believe it’s too soon to tell.
There was a similar kind of anticipation around 2007 to 2009, “that we were going to see just ungodly amounts of insurance fraud triggered by an economic downturn,” said Frank Scafidi of the National Insurance Crime Bureau, but this never occurred to the scale some projected. They saw an increase in arson activity related to cars, however, where a vehicle would be reported stolen to an insurance company when the owner had a hand in the car’s disappearance.
“It may be that we will see some of that downstream, but right now it’s just too soon. And that’s not unusual,” said Scafidi. “You know, you have an event. And then a month or two after, things subside, you start to see the claims roll in, and then you start to see the nefarious acts as part of that. It wouldn’t be surprising to see something from this certainly, we just don’t see it yet.”
Liquidating assets can become the most viable solution in an economy where few people are buying, explained Michael Eriksen, an associate professor of real estate at the University of Cincinnati and an economist whose research shows that arson occurs at a higher rate as houses depreciate in value, notably in states that allow mortgage lenders to sue homeowners to recover losses after foreclosure. “Rarely would you ever make money on an arson,” he said. “You could get a debt forgiven. The only opportunity might be personal property. Let’s say you got a big screen TV and you’ve been laid off. You’d make an argument that says this would be an easy way, especially in an economy like today where nobody’s wanting to buy a flat screen TV on eBay.”
For any kind of fire claim to be viable, “you don’t want it to look like an arson,” said Eriksen. “As one insurance person told me said, ‘Look, you are insured for stupid.’ So if you can claim that you’re an idiot, the insurance company has to pay you, or the insurance company should pay you. And so you have to convince the insurance company that you’re an idiot. An interesting quirk with this, though, is, so you know, there’s a very high threshold to be convicted of arson.”
The third congressional coronavirus stimulus package will provide some relief, said Scafidi, but with increased opportunity for fraud.
“It’s almost as certain that Tuesday follows Monday, that wherever there’s government money doled out for whatever purpose, there’s fraud,” Scafidi said. “Our hope at this point is that the better angels will prevail, but if history is any indicator, fraud will be at some point part of that landscape.”
