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Merging Automobile Insurance Regulatory Bodies: The Case of Atlantic Canada

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  • M. Martin Boyer

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  • Jörg Schiller

Abstract

The recent automobile liability insurance crisis in Atlantic Canada has prompted the four provincial legislations (Newfoundland and Labrador, New Brunswick, Nova Scotia and Prince Edward Island) to setup a task force to redesign, if necessary, the personal automobile insurance system. After reviewing some of the most interesting new regulatory changes, our paper proposes a new area of discussion: The merger of the four provincial insurance regulatory bodies to combat insurance fraud. We base our paper on the principle that recent premium increases are mainly due to an increase in insurance fraud. We show that merging the regulatory bodies may reduce insurance fraud if the merger allows savings on the average audit cost and on the development of better fraud detection technology. Finally, we suggest a fraud reducing insurance taxation scheme to finance insurance fraud investigations. La récente crise dans le Canada Atlantique au sujet de l'assurance de la responsabilité civile des automobilistes a contraint les gouvernements des quatre provinces (Terre-Neuve et Labrador, Nouveau-Brunswick, Nouvelle-Écosse et l'Île-du-Prince-Édouard) à mettre en place une commission pour étudier la possibilité de réorganiser, si nécessaire, leur système d'assurance automobile. Après avoir analysé les plus intéressantes modifications à la réglementation mises en place dans ces provinces, notre étude offre un nouveau terrain de discussion, soit la fusion des quatre réglementations provinciales afin de combattre la fraude à l'assurance. Notre étude se base sur le principe que les récentes augmentations dans les primes sont attribuables à une augmentation de la fraude à l'assurance dans ces provinces. En fusionnant les réglementations des quatre provinces, nous montrons que la fraude à l'assurance peut diminuer si la fusion permet d'épargner une partie du coût de vérification encouru par les assureurs lors de réclamations douteuses. Également, nous montrons qu'une telle fusion peut permettre de développer une meilleure technologie de vérification des réclamations. Nous terminons le papier en suggérant un système de taxation particulier qui non seulement peut financer les investissements nécessaires pour combattre la fraude, mais peut également réduire la fraude directement.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2003s-70.

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Date of creation: 01 Dec 2003
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Handle: RePEc:cir:cirwor:2003s-70

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Keywords: insurance fraud; asymmetric information; insurance taxation; public policy; fraude à l'assurance; information asymétrique; taxation à l'assurance; politique publique;

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Cited by:
  1. Schiller, Jörg, 2004. "Versicherungsbetrug als ökonomisches Problem: Eine vertragstheoretische Analyse," Working Papers on Risk and Insurance 13, University of Hamburg, Institute for Risk and Insurance.

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