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Economic Analysis of Insurance Fraud

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Author Info

  • Pierre Picard

    (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)

Abstract

We survey recent developments in the economic analysis of insurance fraud. The paper first sets out the two main approaches to insurance fraud that have been developped in the literature, namely the costly state verification and the costly state falsification. Under costly state verification, the insurer can verify claims at some cost. Claims' verification may be deterministic or random, and it can be conditioned on fraud signals perceived by insurers. Under costly state falsification, the policyholder expends resources for the building-up of his or her claim not to be detected. We also consider the effects of adverse selection, in a context where insurers cannot distinguish honest policyholders from potential defrauders, as well as the consequences of credibility constraints on anti-fraud policies. Finally, we focus attention on the risk of collusion between policyholders and insurance agents or service providers.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00725561.

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Date of creation: 27 Aug 2012
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Handle: RePEc:hal:wpaper:hal-00725561

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00725561
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Related research

Keywords: Fraud; audit; verification; falsification; collusion; build-up.;

This paper has been announced in the following NEP Reports:

References

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Citations

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Cited by:
  1. Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.
  2. Atwood, Joseph A. & Robinson-Cox, Jim & Shaik, Saleem, 2004. "A Statistical Examination Of Yield Switching Fraud In The Federal Crop Insurance Program," 2004 Annual meeting, August 1-4, Denver, CO 19983, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.

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