Insurance Companies to Fund Arson Investigators, Prosecutor in Michigan

A group of insurance companies have decided to fund a two-year pilot program to fight home arson in Wayne County, Mich., because resources to prosecute offenders are diminished.

Just before the Michigan Insurance Fraud Awareness Coalition held a press conference with Wayne County Prosecutor Kym Worthy, there were seven reported arson fires within that week in Detroit. The city has fallen under difficult economic times and is among the top in terms of foreclosures, said Lori Conarton, spokeswoman for the coalition.

"You can certainly see more of an increase in arson," she said. "Detroit in general is having a rough time right now and people are desperate and will do anything to get out of debt. State funding has been cut and this is not a high-profile crime. Prosecutors do their best but this often gets put on the back burner."

Through the coalition, the insurance industry will pay for two investigators and an assistant prosecutor to focus on arson crime in the county, Conarton said. The two-year pilot program is expected to begin Jan. 1 and cost $1 million. About 10 insurance companies are involved, she said.

One out of every 10 insurance claims is fraudulent and in Michigan that translates to about $3 billion each year. The average family pays $200 to $300 each year in added property insurance premiums because of fraud, according to the Insurance Institute of Michigan.

"Many people wrongly believe that insurance fraud is a low-risk crime," said Pete Kuhnmuench, executive director of the insurance institute.

Arson in an attempt to collect insurance benefits is a growing problem in Michigan even though it is a felony, said the coalition. Arson-related insurance fraud is up about 40% from 2005, according to local fire authorities.

"Everyone ultimately pays for this type of fraud," said Conarton, which is why the group is reaching out to businesses and neighborhood groups to join in the fight and pledge funds. The money will also go toward rewards, billboards, and training for investigators and the insurance industry. "The crime also creates blighted neighborhoods. No one wants burned-out shells of homes everywhere in this city."

Conarton hopes the arson program has as much success as the Auto Theft Prevention Authority. Started to curb a rising automobile theft problem in Michigan, the program is funded by an annual $1 assessment on each auto policy in the state. Since the start of the program, which awards grants to local law enforcement, auto thefts in the state have gone down.

The top five writers of homeowners multiperil insurance in Michigan in 2008, according to A.M. Best state/line data, were: State Farm Group, with 20.4% market share; Auto-Owners Insurance Group, 14.5%; Auto Club Group, 10.2%; Hanover Insurance Group, 9.3%; and Allstate Insurance Group, 8.0%.