The Impact of Economic Conditions on the Incidence of Arson

Abstract

Arson is a phenomenon of concern to the insurance industry. This paper examines the relationship between the movement of several economic indicators and arson losses. The developing of a better understanding of these relationships has brought forth the following implications for the insurance industry. First, greater consideration must be given to the financial position of the insured during the underwriting function. Second increased use must be made of scientific investigative techniques for fraud detection. Finally, a revision of legal procedures is needed to upgrade the seriousness of arson as a crime and to increase the number of cases prosecuted. Arson is a phenomenon which long has been of concern to the insurance industry. Unfortunately, it has not always been a cause for concern to the public. In the past, it has been viewed as a problem affecting only a few individuals: the insured(s) and the insurer(s). A 1972 report to the President vividly illustrated the irreversible economic devastation to property and, more importantly, the heartsickening scars which can be left on the human victims of fire [3]. This report, hopefully, has helped focus additional public attention on fires and the resulting losses. Statistics gathered by the National Fire Protection Association also have helped provide information to the public. Their statistics show that over the two previous decades, arson as a cause of fire has been increasing