NICB: Contractor Fraud Costs U.S. Residents Billions Yearly

With 28 separate natural disaster events costing at least $1 billion and totaling more than $93 billion in catastrophe losses, 2023 was a historic year for billion-dollar weather and climate disasters in the U.S.

That’s a big enough figure. However, up to 10% ($9.3 billion by 2023’s figure) is lost each year to post-disaster fraud, according to the National Insurance Crime Bureau.

NICB is highlighting the figures to celebrate Contractor Fraud Awareness Week, which runs May 20 to 24.

While hurricanes, tornadoes, and other catastrophic events leave millions of Americans struggling to recover and rebuild, these events also provide an opening for dishonest contractors looking to take advantage of homeowners. The fraud not only impacts individuals, but also impacts insurance premiums throughout the industry, according to the NICB.

“Contractor fraud costs hardworking Americans billions of dollars every year,” David J. Glawe, president and CEO of NICB, said in a statement. “After a natural disaster, fraudulent contractors work to exploit the vulnerabilities of unsuspecting homeowners with the promise of affordable renovations, repairs, or construction projects that leave behind a trail of broken promises, shoddy workmanship, and depleted savings.”

NICB partners with government agencies and insurance carriers to educate homeowners and businesses on how to avoid becoming victims of insurance fraud.

NICB recommends following these consumer tips before hiring a contractor:

• Assess Damages: Those who have catastrophe-related damage should reach out to their insurer, and ask for clarification on coverage.
• Recruit a Professional: Seek out a licensed, insured, and well-reviewed contractor before any potential fraudulent contractors come knocking on the door.
• Research and Verify: Before hiring a contractor, research their credentials, reputation, and track record. Check for licenses, certifications, and reviews from previous clients. Verify their insurance coverage and inquire about any past complaints or legal issues.
• Get Multiple Quotes: Obtain bids from multiple contractors for comparison. Be wary of significantly low bids, as they may indicate substandard work or hidden costs. Aim for a balance between affordability and quality.
• Beware of Red Flags: Be alert to red flags such as high-pressure sales tactics, vague or evasive answers, or reluctance to provide written estimates or contracts. Proceed with caution if something seems off.
• Written Contracts: Always insist on a written contract detailing the scope of work, materials, timeline, and a payment schedule that does not include large upfront payments. Review the contract carefully, ensuring that all terms and conditions are clearly outlined and agreed upon by both parties.
• Stay Involved: Stay actively involved in the project by regularly communicating with the contractor and monitoring progress, while keeping records of all work communications.
• Seek Legal Advice if Necessary: If contractor fraud is suspected or significant problems arise during the project, seek legal advice promptly.