Fraudulent claims and nitpicky insurers

Jean-Marc Bourgeon and Pierre Picard

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Abstract: Insurers have the reputation of being bad payers who nitpick whenever 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.

Keywords: Insurance Fraud; audit; nitpicking (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (19)

Published in American Economic Review, 2014, 104 (9), pp.2900-2917. ⟨10.1257/aer.104.9.2900⟩

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Related works:
Journal Article: Fraudulent Claims and Nitpicky Insurers (2014)
Working Paper: Fraudulent Claims and Nitpicky Insurers (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01173052

DOI: 10.1257/aer.104.9.2900

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