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Staff Study of the Role of the Insurance Industry in Dealing With Arson-For-Profit. Permanent Subcommittee on Investigations of the Committee on Governmental Affairs, United States Senate. U.S. Government Printing Office, RR No. 6499. Washington: February, 1979.

Abstract: This article is a report submitted by the subcommittee of investigations of the U.S. Senate regarding the insurance industry's role in the problem of arson for profit. The report concluded that insurance companies actually contribute to the arson crisis. The subcommittee suggests that the insurance industry should change some of its practices to reduce the number of arson for profit crimes.

Insurance companies often insure property at an inflated value. This subcommittee concluded that many arson for profit schemes involved deliberate over-insurance. This study places the blame on insurance companies for failing to check the true value of property before insuring it. This subcommittee report also suggests that insurance companies do not complete thorough background checks of applicants. This senate report also cites the eager insurance agent as part of the problem. Most agents are concerned about the commission from the sale of insurance, rather than protecting the insurer.

Arson cases are rarely challenged in court. Most insurance companies settle out of court to avoid costly litigation. Insurance companies will negotiate with suspicious claimants to save money. One company surveyed admitted their strategy of threatening suspicious claims with legal action to urge them to settle for less, saving the company money.

Insurance companies point to privacy laws as the main obstacle for arson investigation. Privacy laws protect individuals against disclosure of information about them. This prevents insurance companies from contributing information to law enforcement agencies because the individual can sue for slander.

The subcommittee offers recommendations to insurance companies to combat the problem of arson. These suggestions include property inspections and background checks of applicants. The study also suggests insurance companies take more suspicious claims to court. Other recommendations are also provided in this report.

 
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