The landscape of arson-related insurance claims is one of the most complex and nuanced within the industry. This complexity is magnified when arson is tied to organised crime, particularly within the realm of illicit tobacco products. Over the past few years, this issue has taken on greater urgency in Australia, where an alarming trend has emerged: the businesses involved, either directly or indirectly, in the sale of illicit tobacco products are increasingly targeted in arson attacks. These incidents have far-reaching consequences, impacting not only the businesses but also neighbouring properties and the broader community.
The scale of the problem
Victoria Police estimate that one in four tobacco products are sold on the black market. This widespread illicit activity has resulted in a staggering loss of billions in tax revenue nationally. Victoria, in particular, has become a focal point for this illicit trade, with more than 1,000 stores identified by Victoria Police as selling illicit tobacco products. The scale of this problem is underscored by government intelligence, which indicates that multiple crime syndicates are moving millions of dollars offshore each year, further complicating efforts to combat these activities.
The infiltration of illegal tobacco into Australia occurs through various means, with these products being distributed across the country. The consequences of this illegal trade extend beyond the financial losses in tax revenue; they also manifest as arson attacks. In Victoria alone, there have been more than 100 known arson incidents linked to businesses associated with illicit tobacco products. These attacks are not limited to businesses directly involved in selling illegal tobacco but also extend to other enterprises connected to individuals involved in this trade. This trend has created a climate of fear and uncertainty, particularly in communities where these businesses operate.
Based on current trajectories, the illegal cigarette trade is only increasing whilst legal tobacco trade has plummeted.
The broader impact of arson attacks
The ripple effect of arson attacks related to illicit tobacco is profound. Each incident causes significant distress to many stakeholders, including innocent parties such as neighbouring businesses and property owners. These innocent bystanders often find themselves caught in the crossfire, dealing with the physical and financial aftermath of an event they had no part in. The businesses directly involved in the sale of illicit tobacco are usually uninsured, leaving them vulnerable and uninsured from such attacks. However, given the significant profits from the illicit activity, the businesses can swiftly and easily re-open a new business and continue their activities in a new location. As a result, the burden of loss often falls on adjacent businesses, property owners and the broader community, exacerbating the economic and social impact of these crimes.
Arson claims indirectly involving a wide range of businesses—such as barbershops, hairdressers, function centres, community halls, and restaurants—are becoming increasingly common. The connection to illicit tobacco is not always immediately apparent, making these claims particularly challenging to assess and resolve. The ongoing nature of these activities, with no clear end in sight, adds another layer of complexity to the situation.
The evolving threat across Australia
While Victoria has been the epicentre of arson attacks related to illicit tobacco, this threat is slowly spreading to other states, including Queensland, New South Wales, and South Australia. This interstate movement of arson indicates that organised crime syndicates are expanding their operations, seeking new territories and markets for their illegal products. This evolution presents new challenges for law enforcement agencies, insurance companies and other stakeholders involved in addressing this issue.
Victoria Police, in collaboration with the Australian Taxation Office (ATO), the Australian Federal Police (AFP) and other government authorities, has been actively working to tackle illicit tobacco-related crime. The inclusion of the Insurance Council of Australia (ICA) in these efforts highlights the critical role that the insurance industry plays in addressing this issue. In May 2024, Victoria Police took the unprecedented step of issuing letters to property owners, notifying them and their local Councils that their businesses were at increased risk due to the presence of illegal tobacco and/or vapes. This move underscores the seriousness of the threat and the need for a coordinated response.
The importance of expertise in managing arson claims
Effectively managing arson claims requires a deep understanding of the underlying causes, the broader criminal networks involved, and the potential ripple effects on innocent parties. It demands technical expertise in assessing fire damage and determining causality and a broader strategic approach to navigating the legal and ethical challenges associated with these claims. The ability to work closely with law enforcement agencies, government authorities, and industry bodies is crucial in ensuring that these claims are handled with the necessary rigour and sensitivity.
The experience gained from handling multiple arson claims related to illicit tobacco is invaluable in this context. Each claim presents unique challenges, from gathering evidence and establishing the intent to navigating the complex relationships between the businesses involved. The importance of experience and expertise cannot be overstated, as these qualities enable insurers to provide the necessary support to affected businesses and communities.
Sedgwick’s commitment
At Sedgwick, our knowledge, experience, and expertise in handling arson claims are unmatched. Over the past 12 months, we have conducted more than 50 assessments related to illicit tobacco, and ongoing gangland crime activities. Our connections with the Lunar Taskforce and the Insurance Council of Australia position us at the forefront of efforts to address this growing issue. We are ready to assist wherever required, bringing our deep understanding of the complexities of these claims to bear in every case we handle.
As the threat of arson related to illicit tobacco continues to evolve, Sedgwick remains committed to providing our clients with the highest level of service. Our approach is committed to excellence, ensuring every claim is handled with the utmost care and professionalism. In a landscape where the stakes are high, and the challenges are significant, our expertise is a valuable asset for businesses and communities alike.
This content was originally discussed in partnership with the Victoria Police as part of a presentation with Sedgwick.
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Tags: aus, Australia, Claims, crime, international, Property, Restoring property, Risk