ALE Fraud on the Rise

California insurers handling first party property claims are seeing an increase in additional living expense (ALE) fraud, according to Pete Galassi, director at Mercury Insurance.

Claims Journal spoke with Galassi during the Combined Claims Conference, held recently in Orange County, Calif. He discussed the rise in this type of fraud and offered some tips in identifying potentially fraudulent claims.

ALE, he explained, is part of the policy where the insurer puts the insured up in a place to live and provides extra expenses when an incident occurs where the insured can’t live in their house.

“With all the catastrophes we’ve had in California – the fires, the floods – thousands of people aren’t going to be living in their house,” said Galassi. “Last year, at our company, we noticed that there was a trend we were starting to see with people having water claims and fire claims where they would submit questionable or fraudulent invoices saying they were living in the properties, but they weren’t living there.”

Mercury Insurance along with the National Insurance Crime Bureau developed some indicators to assist adjuster in identifying potentially fraudulent claims.

Some indicators of possible ALE fraud include insureds who have found rental homes on their own, rental contracts obtained off the internet and the distance between the insured’s home and rental.

“Let’s say one person lives in one county but the house they’re renting is in a different county, but the receipts they submit are from the county where the house is,” said Galassi. “Why would you live in one county, rent a house in a different county, but the receipts you’re submitting for the groceries and stuff are from the original county you’re in?”

The public needs to be educated about insurance fraud and the fact they could be arrested and punished for the crime, Galassi said.