Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/54215
Authors: 
Schiller, Jörg
Year of Publication: 
2002
Series/Report no.: 
Working Papers on Risk and Insurance 8
Abstract: 
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 auditing becomes more effective. This paper presents conditions under which insurance fraud and the resulting welfare losses can be reduced by the implementation of a costly fraud detection system that is supplied by an external third party.
Subjects: 
insurance fraud
auditing
detection system
JEL: 
D82
G22
Document Type: 
Working Paper

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