Optimal Auditing with Scoring: Theory and Application to Insurance Fraud
نویسندگان
چکیده
This article makes a bridge between the theory of optimal auditing and the scoring methodology in an asymmetric information setting. Our application is meant for asurance claims fraud, but it can be applied to many other activities that use the scoring approach. We show that the optimal auditing strategy takes the form of a "Red Flags Strategy" which consists in referring claims to a Special Investigative unit (SIU) when certain fraud indicators are observed. Fraud indicators are classified based on the degree to which they reveal an increasing probability of fraud. This strategy remains optimal even when the investigation policy is budget constrained. Moreover, the auditing policy acts as a deterrence device and we explain why it requires the commitment of the insurer and how it should affect the incentives of SIU staffs. the models is calibrated with data from a large European insurance company. We compute a critical suspicion index for fraud, providing a threshold above which all claims must be audited and we estimate the potential gain that could be derived from the optimal auditing policy. We show that it is possible to improve these results by separating different groups of insureds with different moral costs of fraud. Finally, our results indicate how the deterrence effect of the audit scheme can be taken into account and how it affects the optimal auditing strategy. Mots clés : Audit, scoring, Fraude à l'assurance, Stratégie d'indicateurs, Indicateurs de fraude, Indice de suspicion, Coût moral de la fraude, Effet de dissasion.
منابع مشابه
Optimal Auditing for Insurance Fraud*
This article aims at making a bridge between the theory of optimal auditing and current procedures applied to audit files in different markets where scoring is the instrument used to implement an audit strategy. The literature has not yet developed an optimal audit policy for the scoring methodology. Our application is meant for the audit of insurance fraud but can be applied to many other acti...
متن کاملThe fog of fraud - Mitigating fraud by strategic ambiguity
Most insurance companies publish few data on the occurrence and detection of insurance fraud. This stands in contrast to the previous literature on costly state verification, which has shown that it is optimal to commit to an auditing strategy, as the credible announcement of thoroughly auditing claim reports might act as a powerful deterrent. We show that uncertainty about fraud detection can ...
متن کاملImproving Fraud and Abuse Detection in General Physician Claims: A Data Mining Study
Background We aimed to identify the indicators of healthcare fraud and abuse in general physicians’ drug prescription claims, and to identify a subset of general physicians that were more likely to have committed fraud and abuse. Methods We applied data mining approach to a major health insurance organization dataset of private sector general physicians’ prescription claims. It involved 5 ste...
متن کاملThe Impact of Insurance Fraud Detection
The purpose of this paper is to characterize the impact of fraud detection systems on the auditing procedure and the equilibrium insurance contract, when a policyholder can report a loss that never occurred. Insurers can only detect fraudulent claims through a costly audit (costly state verification). With fraud detection system insurers can depend their audit on the signal of the system and au...
متن کاملBusiness quality control in issuing life insurance.
Fraud investigation and fraud control are entirely different processes. Similarly the auditing of a life insurance company and the issuing of life insurance policies and business quality control are not the same. Business quality control and fraud control have much in common. In this article, these similarities are explored and a case is made that companies issuing life insurance policies shoul...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید
ثبت ناماگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید
ورودعنوان ژورنال:
- Management Science
دوره 55 شماره
صفحات -
تاریخ انتشار 2009