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Economic Analysis of Insurance Fraud

  • Chapter
Handbook of Insurance

Abstract

We survey recent developments in the economic analysis of insurance fraud. The paper first sets out the two main approaches to insurance fraud that have been developed in the literature, namely the costly state verification and the costly state falsification. Under costly state verification, the insurer can verify claims at some cost. Claims’ verification may be deterministic or random. Under costly state falsification, the policyholder expends resources for the building-up of his or her claim not to be detected. We also consider the effects of adverse selection, in a context where insurers cannot distinguish honest policyholders from potential defrauders, as well as the consequences of credibility constraints on anti-fraud policies. Finally, we focus attention on the risk of collusion between policyholders and agents in charge of marketing insurance contracts.

I am particularly grateful to two referees for their detailed comments on a previous version of this chapter.

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Authors and Affiliations

  1. Université Paris X-Nanterre, France

    Pierre Picard

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  1. Pierre Picard
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Editor information

Editors and Affiliations

  1. HEC-Montréal, Canada

    Georges Dionne (Risk Management Chair) (Risk Management Chair)

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© 2000 Springer Science+Business Media New York

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Picard, P. (2000). Economic Analysis of Insurance Fraud. In: Dionne, G. (eds) Handbook of Insurance. Huebner International Series on Risk, Insurance, and Economic Security, vol 22. Springer, Dordrecht. https://doi.org/10.1007/978-94-010-0642-2_10

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  • DOI: https://doi.org/10.1007/978-94-010-0642-2_10

  • Publisher Name: Springer, Dordrecht

  • Print ISBN: 978-0-7923-7911-9

  • Online ISBN: 978-94-010-0642-2

  • eBook Packages: Springer Book Archive

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