Avoiding contractor fraud in the wake of a disaster

There were 28 separate billion-dollar climate catastrophes in the United States in 2023, and 2024 is already shaping up to be an active year for severe weather. In the wake of these events, those affected are left vulnerable to shady contractors as they recover and rebuild their lives.

To combat this growing problem, the National Insurance Crime Bureau (NICB) educates consumers on how to avoid these fraudsters as part of its annual Contractor Fraud Awareness Week, which is being observed May 20 through 24 this year. According to the NICB, around 10% of the cost of disasters each year is lost to contractor fraud, and in 2023, these fraud losses added up to around $9.3 billion. This level of fraud not only impacts rebuilding efforts, but can also affect insurance premiums.

"Contractor fraud costs hardworking Americans billions of dollars every year," David J. Glawe, president and CEO of NICB, said in a release. "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."

It's imperative homeowners are proactive in the aftermath of a catastrophic event in order to make themselves less vulnerable to these scams. This includes reaching out to their insurer to clarify their coverage and seeking out a licensed, insured and well-reviewed contractor before scammers have the chance to strike. Insureds should research the credentials of potential contractors (including their insurance coverage), obtain quotes from multiple contractors for comparison and beware of potential red flags that could signal someone has bad intentions.

Some of the most common contractor red flags the NICB recommends homeowner be wary of are:

• They claim to be approved by FEMA or other agencies.
• They came from out-of-state, especially after a catastrophe.
• They require payment upfront in order to schedule work.
• They offer unsolicited services.
• They pressure you to quickly sign electronic documents.

If an insured believes they have been a victim of or witnessed contractor fraud, it is important they report it immediately to the NICB at (800) 835-6422.