Review of Managerial Science

, Volume 12, Issue 3, pp 711–736 | Cite as

Contract design and insurance fraud: an experimental investigation

  • Frauke von Bieberstein
  • Jörg Schiller
Original Paper


This paper experimentally examines the impact of contract design on insurance fraud. We test how fraud behavior varies for insurance contracts with full coverage, a straight deductible or claim-dependent premiums (bonus-malus contracts), in a setup where rational and selfish individuals have an incentive to always claim the maximum possible indemnity. We find a substantial impact of contractual arrangements: Deductible contracts lead to a greater extent to claim build-up than full coverage contracts. In contrast, bonus-malus contracts that entail the same net gains from fraud as deductible contracts do not increase claim build-up. Thus, our results indicate that bonus-malus contracts may be superior to deductible contracts for behavioral reasons.


Insurance fraud Experiment Contract design Deductible Bonus-malus 

JEL Classification

G22 C91 D03 



Financial support from the German Insurance Science Foundation (Deutscher Verein für Versicherungswissenschaft e.V.) is gratefully acknowledged, von Bieberstein also thanks the Volkswagen Foundation for the support (Grant No. 85 487). We thank Sebastian Ebert, Ole von Häfen, Achim Wambach, and two anonymous referees for their very valuable comments and especially the MELESSA team at the Ludwig-Maximilians-Universität Munich for their support with the experiments.

Supplementary material

11846_2017_228_MOESM1_ESM.doc (73 kb)
Supplementary material 1 (DOC 73 kb)


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Copyright information

© Springer-Verlag Berlin Heidelberg 2017

Authors and Affiliations

  1. 1.Universitaet Bern, Institute for Organization and HRMBernSwitzerland
  2. 2.Universitaet Hohenheim, Institute for Health Care & Public ManagementStuttgartGermany

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