The Impact of Insurance Fraud Detection Systems
AbstractThe purpose of this paper is to characterize the impact of fraud detection systems on the auditing procedure and the equilibrium insurance contract, when a policyholder can report a loss that never occurred. Insurers can only detect fraudulent claims through a costly audit (costly state verification). With a fraud detection system insurers can depend their audit on the signal of the system and auditing becomes more effective. This paper presents conditions under which insurance fraud and the resulting welfare losses can be reduced by the implementation of a costly fraud detection system that is supplied by an external third party.
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Bibliographic InfoPaper provided by EconWPA in its series Microeconomics with number 0309003.
Length: 20 pages
Date of creation: 05 Sep 2003
Date of revision: 02 Oct 2003
Note: Type of Document - none; prepared on PC; pages: 20 ; figures: included
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insurance fraud; auditing; detection systems; costly state verification;
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-09-08 (All new papers)
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