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Fraudulent Claims and Nitpicky Insurers

Jean-Marc Bourgeon () and Pierre Picard

American Economic Review, 2014, vol. 104, issue 9, 2900-2917

Abstract: Insurers have the reputation of being bad payers who nitpick when- ever an opportunity arises. However, this nitpicking activity has a positive impact on their auditing strategy since auditing may prove profitable when claims are not fraudulent. We show that reducing the indemnity payments of audited claims induces a lower fraud rate at equilibrium and that some degree of nitpicking is socially optimal when insurance fraud is a concern. Its remains optimal even if it induces adverse effects on policyholders' moral standards.

JEL-codes: D86 G22 K12 K42 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.9.2900
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Working Paper: Fraudulent claims and nitpicky insurers (2014)
Working Paper: Fraudulent Claims and Nitpicky Insurers (2012) Downloads
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Handle: RePEc:aea:aecrev:v:104:y:2014:i:9:p:2900-2917