Ask an Expert: How do fire investigations identify fraudulent claims, and what's the impact on the policyholder?

Fire-related claims are subject to heightened scrutiny due to the potential for fraud.

Fraudulent fire claims, where a fire is intentionally lit or misrepresented to obtain a payout, pose significant legal, financial, and reputational risks.

Detecting and managing these claims effectively is essential for maintaining the integrity of the insurance system.

How fraudulent fire claims are identified

When a fire claim is lodged, insurers typically initiate a thorough investigation to establish the cause and origin of the incident.

If anomalies are detected - such as inconsistent statements, financial distress, or recent policy changes - specialist investigators may be appointed to explore the matter further.

These investigations often involve:

• Forensic fire analysis – examining burn patterns, accelerant residues, electrical faults, and structural damage.
• Surveillance and factual investigations – gathering information through interviews, site inspections, and external data sources.
• Collaboration with authorities – working alongside police and fire services if criminal activity or arson is suspected.
• Financial and behavioural profiling – identifying motives such as debt, recent asset valuations, or unusual activity leading up to the event.

Common indicators of potential fraud include:

• Presence of accelerants without a clear accidental ignition source
• Tampering or disabling of fire alarms and sprinkler systems
• Premature removal of high-value items
• A pattern of multiple or suspicious claims
• Contradictory statements from involved parties or witnesses

Industry response and consequences

If an investigation finds that the fire was deliberately set by or on behalf of the insured, the claim is typically denied in full. Fraudulent claims breach the principle of utmost good faith and may result in severe consequences, including:

• Denial of the entire claim, regardless of any legitimate loss
• Cancellation of the insurance policy
• Referral for criminal prosecution
• Civil action to recover paid amounts
• Reporting to the Insurance Fraud Bureau of Australia (IFBA)

These outcomes are designed not only to deter fraudulent activity but also to protect the insurer’s broader customer base from the impact of increased claims costs and premiums.

Upholding industry standards

Proactive fraud detection is a key component of claims management. By investing in skilled investigators and forensic specialists, insurers can identify fraudulent behaviour early, mitigate losses, and safeguard the reputation of the sector.

Continued collaboration across the industry, including intelligence sharing, training, and technological investment, strengthens the ability to detect fraud and maintain fairness for legitimate claimants.

Attributable to James Walker, Managing Director, ANSIC

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