Claims Auditing in Automobile Insurance
نویسنده
چکیده
Research on insurer management of opportunism in claiming has developed in two parallel literatures. One is a theoretical literature on insurance contracting that yields predictions about the nature of optimal auditing strategies for the deterrence of fraud. The other is a literature based upon statistical analysis of claims that yields empirical strategies for the detection of fraudulent claims. This article links the two literatures by providing an empirical assessment of insurers’ auditing practices in relation to the predictions of the two approaches. The analysis makes use of a data set on the disposition of over 1000 randomly selected automobile personal injury protection (PIP) claims settled in the state of Massachusetts. The findings of the paper are consistent with the use of economically rational auditing strategies by insurers, and with a significant (but not exclusively) deterrent role for auditing.
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