IDEAS home Printed from https://ideas.repec.org/p/fth/etcori/96-02.html
   My bibliography  Save this paper

Insurance Fraud Estimation: More Evidence from the Quebec Automobile Insurance Industry

Author

Listed:
  • Caron, L.
  • Dionne, G.

Abstract

This article follows a previous study on insurance fraud in the Quebec automobile insurance industry (Dionne and Belhadji, 1996). Results from that research showed that 3 to 6,4% of all claim payments (excluding those for "glass damage only") contained fraud, representing 28 to 61 million dollars in 1994-1995. This evaluation was a minimum since it was limited to observed fraud only. In this paper, we apply a statistical method to estimate the total fraud level in the industry for the same period. Our results show a multiplicative factor of 3,4% of fraudulent files found in Dionne and Belhadji, which means that total fraud payments ranged from 96,2 to 208,4 million dollars in 1994-1995. Our Best Guest Estimator roughly a 10% fraud rate or about 113,5 million dollars.

Suggested Citation

  • Caron, L. & Dionne, G., 1996. "Insurance Fraud Estimation: More Evidence from the Quebec Automobile Insurance Industry," Ecole des Hautes Etudes Commerciales de Montreal- 96-02, Ecole des Hautes Etudes Commerciales de Montreal-Chaire de gestion des risques..
    • Handle: RePEc:fth:etcori:96-02
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. J. David Cummins & Sharon Tennyson, 1992. "Controlling Automobile Insurance Costs," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 95-115, Spring.
    2. Picard, Pierre, 1996. "Auditing claims in the insurance market with fraud: The credibility issue," Journal of Public Economics, Elsevier, vol. 63(1), pages 27-56, December.
    3. Dionne, G. & St-Michel, P. & Vanasse, C., 1989. "Moral Hazard, Optimal Auditing And Workers' Compensation," Cahiers de recherche 8941, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    4. Dionne, Georges & St-Michel, Pierre, 1991. "Workers' Compensation and Moral Hazard," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 236-244, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dionne, Georges, 2000. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud," Working Papers 00-4, HEC Montreal, Canada Research Chair in Risk Management.
    2. M. Martin Boyer, 2007. "Resistance (to Fraud) Is Futile," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(2), pages 461-492, June.
    3. Lang, Matthias & Wambach, Achim, 2013. "The fog of fraud – Mitigating fraud by strategic ambiguity," Games and Economic Behavior, Elsevier, vol. 81(C), pages 255-275.
    4. Dionne, Georges & Gagne, Robert, 2002. "Replacement Cost Endorsement and Opportunistic Fraud in Automobile Insurance," Journal of Risk and Uncertainty, Springer, vol. 24(3), pages 213-230, May.
    5. Cohen Alma, 2006. "The Disadvantages of Aggregate Deductibles," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-28, April.
    6. Lammers, Frauke & Schiller, Jörg, 2010. "Contract design and insurance fraud: An experimental investigation," FZID Discussion Papers 19-2010, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    7. Dionne, Georges, 1998. "La mesure empirique des problèmes d’information," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(4), pages 585-606, décembre.
    8. Georges Dionne & Robert Gagné, 2001. "Deductible Contracts Against Fraudulent Claims: Evidence From Automobile Insurance," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 290-301, May.
    9. Scalera Domenico & Zazzaro Alberto, 2007. "The Unpleasant Effects of Price Deregulation in the European Third-Party Motor Insurance Market: A Theoretical Framework," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-30, October.
    10. Belhadji, B. & Dionne, G., 1997. "Developpement d'un systeme expert de detection automatique de la fraude a l'assurance automobile," Ecole des Hautes Etudes Commerciales de Montreal- 97-04, Ecole des Hautes Etudes Commerciales de Montreal-Chaire de gestion des risques..
    11. Donatella Porrini, 2002. "Frodi nell'assicurazione RC Auto: analisi economica e possibili rimedi," Rivista di Politica Economica, SIPI Spa, vol. 92(2), pages 109-138, March-Apr.
    12. Chu-Shiu Li & Chwen-Chi Liu & Sheng-Chang Peng, 2013. "Expiration Dates in Automobile Insurance Contracts: The Curious Case of Last Policy Month Claims in Taiwan," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 38(1), pages 23-47, March.
    13. Akın, Zafer, 2023. "Direct lying or playing the victim? An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 150-169.
    14. Domenico SCALERA & Alberto ZAZZARO, 2004. "From regulation to free market: the experience of the European motor insurance market," Working Papers 205, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    15. Dionne, Georges, 2012. "The empirical measure of information problems with emphasis on insurance fraud and dynamic data," Working Papers 12-10, HEC Montreal, Canada Research Chair in Risk Management.
    16. Dionne, Georges & Gagné, Robert, 1997. "The non-optimality of deductible contracts against fraudulent claims: an empirical evidence in automobile insurance," Working Papers 97-5, HEC Montreal, Canada Research Chair in Risk Management.
    17. Stijn Viaene & Guido Dedene, 2004. "Insurance Fraud: Issues and Challenges," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 29(2), pages 313-333, April.
    18. Herweg, Fabian & Müller, Daniel, 2008. "The Optimality of Simple Contracts: Moral Hazard and Loss Aversion," Bonn Econ Discussion Papers 17/2008, University of Bonn, Bonn Graduate School of Economics (BGSE).
    19. Frauke von Bieberstein & Jörg Schiller, 2018. "Contract design and insurance fraud: an experimental investigation," Review of Managerial Science, Springer, vol. 12(3), pages 711-736, July.
    20. Akin, Zafer, 2022. "Playing the victim behavior: an experimental study," MPRA Paper 115532, University Library of Munich, Germany.
    21. Richard Watt, 2003. "Curtailing Ex-Post Fraud in Risk Sharing Arrangements," European Journal of Law and Economics, Springer, vol. 16(2), pages 247-263, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pierre Picard, 2025. "Economic Analysis of Insurance Fraud," Springer Books, in: Georges Dionne (ed.), Handbook of Insurance, edition 0, pages 259-323, Springer.
    2. P. Picard, 1998. "Insurance fraud : theory," THEMA Working Papers 98-26, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    3. Dionne, Georges, 1998. "La mesure empirique des problèmes d’information," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(4), pages 585-606, décembre.
    4. Picard, Pierre, 2000. "On the Design of Optimal Insurance Policies under Manipulation of Audit Cost," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(4), pages 1049-1071, November.
    5. Robert E. Hoyt & David B. Mustard & Lars S. Powell, 2005. "The Effectiveness of Insurance Fraud Statutues: Evidence from Automobile Insurance," Risk and Insurance 0501001, University Library of Munich, Germany.
    6. M. Martin Boyer & Jörg Schiller, 2003. "Merging Automobile Insurance Regulatory Bodies: The Case of Atlantic Canada," CIRANO Working Papers 2003s-70, CIRANO.
    7. Georges Dionne & Robert Gagné, 2001. "Deductible Contracts Against Fraudulent Claims: Evidence From Automobile Insurance," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 290-301, May.
    8. Dionne, Georges & Gagne, Robert, 2002. "Replacement Cost Endorsement and Opportunistic Fraud in Automobile Insurance," Journal of Risk and Uncertainty, Springer, vol. 24(3), pages 213-230, May.
    9. Richard A. Derrig & Sharon Tennyson, 2011. "The Impact of Rate Regulation on Claims: Evidence From Massachusetts Automobile Insurance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 14(2), pages 173-199, September.
    10. Domenico SCALERA & Alberto ZAZZARO, 2004. "From regulation to free market: the experience of the European motor insurance market," Working Papers 205, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    11. Dionne, Georges, 2012. "The empirical measure of information problems with emphasis on insurance fraud and dynamic data," Working Papers 12-10, HEC Montreal, Canada Research Chair in Risk Management.
    12. Brian Richman & Sharon Tennyson, 2022. "The effects of state legal environments on automobile insurance claims and compensation: Evidence from the Royal Globe doctrine," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(4), pages 491-513, December.
    13. Picard, Pierre, 1996. "Auditing claims in the insurance market with fraud: The credibility issue," Journal of Public Economics, Elsevier, vol. 63(1), pages 27-56, December.
    14. Artis, Manuel & Ayuso, Mercedes & Guillen, Montserrat, 1999. "Modelling different types of automobile insurance fraud behaviour in the Spanish market," Insurance: Mathematics and Economics, Elsevier, vol. 24(1-2), pages 67-81, March.
    15. Jill M. Bisco & Kathleen A. McCullough & Charles M. Nyce, 2019. "Postclaim Underwriting And The Verification Of Insured Information: Evidence From The Life Insurance Industry," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 86(1), pages 7-38, March.
    16. Boyer, M. Martin & Schiller, Jörg, 2003. "Merging automobile regulatory bodies: The case of Atlantic Canada," Working Papers on Risk and Insurance 11, University of Hamburg, Institute for Risk and Insurance.
    17. Ingela Alger & Régis Renault, 2006. "Screening Ethics When Honest Agents Care About Fairness ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 59-85, February.
    18. M. Martin Boyer, 2007. "Resistance (to Fraud) Is Futile," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(2), pages 461-492, June.
    19. McShane, Michael K. & Cox, Larry A. & Butler, Richard J., 2010. "Regulatory competition and forbearance: Evidence from the life insurance industry," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 522-532, March.
    20. Paola Fersini & Salvatore Forte & Giuseppe Melisi & Gennaro Olivieri, 2019. "A stochastic model to evaluate pricing distortions in indemnity insurance methods for MTPL insurance," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 42(1), pages 103-133, June.

    More about this item

    Keywords

    FINANCIAL MARKET ; INFORMATION ; INSURANCE;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fth:etcori:96-02. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Krichel (email available below). General contact details of provider: https://edirc.repec.org/data/hecmtca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.