Now that it’s April, apart from April showers and warmer temperatures, many Americans start thinking about the April 15th tax deadline that’s rapidly approaching. Not so coincidentally, the month of April typically sees a spike in the number of homeowner claims filed. You can probably guess the other time a similar increase in claims occurs – around the holidays later in the year.
Presumably consumers panic when it comes time to pay their tax bills as well as get anxious about the need for extra cash around holiday time. A smaller spike occurs around August/September when tuition bills are traditionally due.
According to our data, based on the $3.5 billion in claims we’re processing annually for the industry, not only does the number of claims rise during April but severity also increases. In fact, over time, our data shows a 15.2% increase from $5,398 in January 2010 to more than $7,283 in February of this year. That’s 5x the rate of inflation and a dramatic increase from the severities of around $1K that were common 15-20 years ago.
So what’s going on? I can point to one of my own experiences in having to re-do many of my jewelry and other appraisals when moving homes a couple of years ago. As part of the process, I discovered I was still paying a rider for a bracelet that I’d lost and collected a check on but never actually replaced. The company doing the appraisal suggested that I could potentially file a claim for the bracelet with minimal questions asked. Gauging my surprised reaction, the company quickly backed off but this incident illustrates what may be happening with theft claims every day.
Because of the relative lack of rigor surrounding many home owners’ insurance theft claims, the growth is occurring largely unnoticed. If similar trends occurred with auto, you can bet red flags would pop up immediately. Interestingly enough, the average homeowner theft claim is $7283 while the average auto physical damage is just $2500 according to CCC Information Services and has moved very little over the last five years.
So how to address this issue because as everyone knows, widespread fraud raises the costs for everyone. First, be more discerning about “fast-tracking” theft claims and examining those claims that fall outside expected data ranges of average retail value such as laptop claims over $400, for example. Second, in this digital age, ask for credit card records. Few policy holders these days pay cash for big ticket items and should be able to request records from up to 10 years back from credit card companies documenting purchases.
Let us know if you are seeing similar trends and how you’re addressing this potential issue. And, of course, happy tax time.