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Preliminary investigations for better monitoring. Learning in repeated insurance audits

Reda Aboutajdine and Pierre Picard

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Abstract: Audit mechanisms frequently take place in the context of repeated relationships between auditor and auditee. This paper focuses attention on the insurance fraud problem in a setting where insurers repeatedly verify claims satisfied by service providers (e.g., affiliated car repairers or members of managed care networks). We highlight a learning bias that leads insurers to over-audit service providers at the beginning of their relationship. The paper builds a bridge between the literature on optimal audit in insurance and the exploitation/exploration trade-off in multi-armed bandit problems.

Keywords: learning; optimal auditing; ex-post moral hazard; insurance fraud (search for similar items in EconPapers)
Date: 2018-02-20
New Economics Papers: this item is included in nep-acc, nep-ias and nep-mic
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Journal Article: Preliminary Investigations for Better Monitoring: Learning in Repeated Insurance Audits (2018) Downloads
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