Schmalenbach Business Review

, Volume 70, Issue 2, pp 111–147 | Cite as

Can we Trust Consumers’ Survey Answers when Dealing with Insurance Fraud?

Evidence from an Experiment
Original Article

Abstract

Consumer surveys (e. g., questionnaires, telephone surveys) are important means to measure the acceptability and willingness to commit insurance fraud as well as related influencing factors. However, for such a sensitive issue, it is unclear to what extent individuals’ stated attitudes correspond to actual behavior. We use a two-stage within-subject procedure that consists of an experiment and a questionnaire. In the experiment, participants are incentivized and have the opportunity to commit fraud by claiming losses that have not occurred or by exaggerating occurred losses. When comparing participants’ behavior in the lab experiment with their answers to a standard survey, we do not find a strong correlation between self-stated attitudes toward insurance fraud and behavior in the experiment.

Keywords

Insurance Fraud Lab Experiment Survey Misreporting Contract Design 

JEL Classification

G22 C91 D1 

Notes

Acknowledgments

Financial support from the German Insurance Science Foundation (Deutscher Verein für Versicherungswissenschaft e. V.) is gratefully acknowledged, von Bieberstein also thanks the Volkswagen Foundation (VolkswagenStiftung) for the support (Grant No. 85 487). We thank Christian Biener, Glenn Harrison, Martin Nell, two anonymous referees, and the editors for their very valuable comments and the MELESSA team at the Ludwig-Maximilians-Universität Munich for their support with the experiments.

References

  1. Ariely, Dan. 2013. The honest truth about dishonesty: how we lie to everyone—especially ourselfes. London: HarperCollins.Google Scholar
  2. Artís, Manuel, Mercedes Ayuso, and Montserrat Guillen. 1999. Modelling different types of automobile insurance fraud behaviour in the Spanish market. Insurance: Mathematics and Economics 24:67–81.Google Scholar
  3. Artís, Manuel, Mercedes Ayuso, and Montserrat Guillen. 2002. Detection of automobile insurance fraud with discrete choice models and misclassified claims. Journal of Risk and Insurance 69:325–340.CrossRefGoogle Scholar
  4. Balafoutas, Loukas, Adrian Beck, Rudolf Kerschbamer, and Matthis Sutter. 2013. What drives taxi drivers? A field experiment on fraud in a market for credence goods. Review of Economic Studies 80:876–891.CrossRefGoogle Scholar
  5. Bertrand, Marianne, and Sendhil Mullainathan. 2001. Do people mean what they say? Implications for subjective survey data. American Economic Review 91:67–72.CrossRefGoogle Scholar
  6. von Bieberstein, Frauke, and Jörg Schiller. 2017. Contract design and insurance fraud: an experimental investigation. Review of Managerial Science.  https://doi.org/10.1007/s11846-017-0228-1.Google Scholar
  7. Coalition against Insurance Fraud. 2003. Study on SIU performance measurement. http://www.insurancefraud.org/downloads/siu_study.pdf (Created 06.2003). Accessed 17 October 2017.Google Scholar
  8. Coalition against Insurance Fraud. 2014. Survey: anti-fraud tech plays growing role and offers ROI, more insurers say, news release of 23.09.2014. http://www.insurancefraud.org/news-release-detail.htm?. Accessed 17 October 2017.Google Scholar
  9. Coalition against Insurance Fraud. 2015. The impact of insurance fraud. http://www.insurancefraud.org/the-impact-of-insurance-fraud.htm. Accessed 17 October 2017.Google Scholar
  10. Colquitt, L. Lee, and Robert E. Hoyt. 1997. An empirical analysis of the nature and cost of fraudulent life insurance claims: evidence from resisted claims data. Journal of Insurance Regulation 15:451–479.Google Scholar
  11. Croson, Rachel, and Uri Gneezy. 2009. Gender differences in preferences. Journal of Economic Literature 47:448–474.CrossRefGoogle Scholar
  12. Cummings, Ronald G., Jorge Martinez-Vazquez, Michael McKee, and Benno Torgeler. 2009. Tax morale affects tax compliance: evidence from surveys and an artefactual field experiment. Journal of Economic Behavior & Organization 70:447–457.CrossRefGoogle Scholar
  13. Cummins, J. David, and Sharon Tennyson. 1996. Moral hazard in insurance claiming: evidence from automobile insurance. Journal of Risk and Uncertainty 12:29–50.CrossRefGoogle Scholar
  14. Debreband, Serge. 2011. Versicherungsbetrug – Ist mir leider aus der Hand gefallen. http://www.gdv.de/2011/06/hintergrund-ist-mir-leider-aus-der-hand-gefallen/ (Created 9 June 2011). GDV press release. Accessed 17 October 2017.Google Scholar
  15. Derrig, Richard A. 2002. Insurance fraud. Journal of Risk and Insurance 69:271–287.CrossRefGoogle Scholar
  16. Dionne, Georges, and Robert Gagné. 2001. Deductible contracts against fraudulent claims: evidence from automobile insurance. Review of Economics and Statistics 83:290–301.CrossRefGoogle Scholar
  17. Dionne, Georges, Florence Giuliano, and Pierre Picard. 2009. Optimal auditing with scoring: theory and application to insurance fraud. Management Science 55:58–70.CrossRefGoogle Scholar
  18. Dohmen, Thomas, Armin Falk, David Huffman, Uwe Sunde, Jürgen Schupp, and Gert G. Wagner. 2011. Individual risk attitudes: measurement, determinants, and behavioral consequences. Journal of the European Economic Association 9:522–550.CrossRefGoogle Scholar
  19. Elliott, Delbert S., J. Wilson William, David Huizinga, Robert J. Sampson, Amanda Elliott, and Bruce Rankin. 1996. The effects of neighborhood disadvantage on adolescent development. Journal of Research in Crime and Delinquency 33:389–426.CrossRefGoogle Scholar
  20. Falk, Armin, and James J. Heckman. 2009. Lab experiments are a major source of knowledge in the social sciences. Science 326:535–538.CrossRefGoogle Scholar
  21. Falk, Armin, Stephan Meier, and Christian Zehnder. 2013. Do lab experiments misrepresent social preferences? The case of self-selected student samples. Journal of the European Economic Association 11:839–852.CrossRefGoogle Scholar
  22. Federal Bureau of Investigation. 2015. Insurance fraud, reports and publications. http://www.fbi.gov/stats-services/publications/insurance-fraud. Accessed 17 October 2017.Google Scholar
  23. Fendrich, Michael, and Connie M. Vaughn. 1994. Diminished lifetime substance use over time: an inquiry into differential underreporting. Public Opinion Quarterly 58:96–123.CrossRefGoogle Scholar
  24. Festinger, Leon. 1962. A theory of cognitive dissonance. Vol. 2. Palo Alto: Stanford University Press.Google Scholar
  25. Fischbacher, Urs, and Franziska Föllmi-Heusi. 2013. Lies in disguise—an experimental study on cheating. Journal of the European Economic Association 11:525–546.CrossRefGoogle Scholar
  26. Frank, Björn, and Günther G. Schulze. 2000. Does economics make citizens corrupt? Journal of Economic Behavior & Organization 43:101–113.CrossRefGoogle Scholar
  27. Frey, Bruno S., and Stephan Meier. 2004. Pro-social behavior in a natural setting. Journal of Economic Behavior & Organization 54:65–88.CrossRefGoogle Scholar
  28. Fullerton, Sam, Kathleen B. Kerch, and H. Robert Dodge. 1996. Consumer ethics: an assessment of individual behavior in the market place. Journal of Business Ethics 15:805–814.CrossRefGoogle Scholar
  29. Gabaldόn, Ignacio Moreno, Francisco José Vázquez Hernández, and Richard Watt. 2014. The effect of contract type on insurance fraud. Journal of Insurance Regulation 33:197–230.Google Scholar
  30. Gneezy, Uri. 2005. Deception: the role of consequences. American Economic Review 95:384–394.CrossRefGoogle Scholar
  31. Grolleau, Gilles, Martin G. Kocher, and Angela Sutan. 2016. Cheating and loss aversion: do people cheat more to avoid a loss? Management Science 62:3428–3438.CrossRefGoogle Scholar
  32. Hallsworth, Michael, John A. List, Robert D. Metcalfe, and Ivo Vlaev. 2017. The behavioralist as tax collector: using natural field experiments to enhance tax compliance, forthcoming. Journal of Public Economics 148:14–31.  https://doi.org/10.1016/j.jpubeco.2017.02.003.CrossRefGoogle Scholar
  33. Harrison, Glenn W., and John A. List. 2004. Field experiments. Journal of Economic Literature 42:1009–1055.CrossRefGoogle Scholar
  34. Heeb, Jean-Luc, and Gerhard Gmel. 2005. Measuring alcohol consumption: a comparison of graduated frequency, quantity frequency, and weekly recall diary methods in a general population survey. Addictive Behaviors 30:403–413.CrossRefGoogle Scholar
  35. Houser, Daniel, Stefan Vetter, and Joachim Winter. 2012. Fairness and cheating. European Economic Review 56:1645–1655.CrossRefGoogle Scholar
  36. Hoyt, Robert E. 1990. The effect of insurance fraud on the economic system. Journal of Insurance Regulation 8:304–315.Google Scholar
  37. John, Karsten. 2011. Versicherungsbetrug: aktuelle Entwicklungen, Muster und ihre Abwehr, GDV press release of 12.07.2011. http://www.gdv.de/wp-content/uploads/2011/11/PK_Versicherungsbetrug_2011_Praes1_Versicherungsbetrug_in_Deutschland_GfK_KarstenJohn_n4.pdf. Accessed 17 October 2017.Google Scholar
  38. Kleven, Henrik Jacobsen, Martin B. Knudsen, Claus Thustrup Kreiner, Soren Pedersen, and Emmanuel Saez. 2011. Unwilling or unable to cheat? Evidence from a tax audit experiment in Denmark. Econometrica 79:651–692.CrossRefGoogle Scholar
  39. Lammers, Frauke, and Jörg Schiller. 2010. Einflussfaktoren für betrügerisches Verhalten von Versicherungsnehmern: erste experimentelle Befunde. Zeitschrift für die gesamte Versicherungswissenschaft 99:649–663.CrossRefGoogle Scholar
  40. Lergetporer, Philipp, Silvia Angerer, Daniela Glätzle-Rützler, and Matthias Sutter. 2014. Third-party punishment increases cooperation in children through (misaligned) expectations and conditional cooperation. Proceedings of the National Academy of Sciences 111:6916–6921.CrossRefGoogle Scholar
  41. Levitt, Steven D., and John A. List. 2007. What do laboratory experiments measuring social preferences reveal about the real world? Journal of Economic Perspectives 21:153–174.CrossRefGoogle Scholar
  42. Mazar, Nina, On Amir, and Dan Ariely. 2008. The dishonesty of honest people: a theory of self-concept maintenance. Journal of Marketing Research 45:633–644.CrossRefGoogle Scholar
  43. Miyazaki, Anthony D. 2009. Perceived ethicality of insurance claim fraud: do higher deductibles lead to lower ethical standards? Journal of Business Ethics 87:589–598.CrossRefGoogle Scholar
  44. Moreno, Ignacio, Francisco J. Vazquez, and Richard Watt. 2006. Can bonus-malus allieviate insurance fraud? Journal of Risk and Insurance 73:123–151.CrossRefGoogle Scholar
  45. Müller, Katja. 2013. The identification of insurance fraud—an empirical analysis. University of St. Gallen working papers on risk management and insurance no. 137.Google Scholar
  46. Nagin, Daniel S., and Greg Pogarsky. 2003. An experimental investigation of deterrence: cheating, self-serving bias, and impulsivity. Criminology 41:167–194.CrossRefGoogle Scholar
  47. National Insurance Crime Bureau. 2015. Insurance Fraud: Understanding the Basics, Fact Sheets—Insurance Fraud.Google Scholar
  48. Nell, Martin. 1998. Das moralische Risiko und seine Erscheinungsformen. Frankfurter Vorträge zum Versicherungswesen, Vol. 29. Karlsruhe: Verlag Versicherungswirtschaft.Google Scholar
  49. Nell, Martin, and Jörg Schiller. 2002. Erklärungsansätze für vertragswidriges Verhalten von Versicherungsnehmern aus Sicht der ökonomischen Theorie. Zeitschrift für die gesamte Versicherungswissenschaft 91:533–556.CrossRefGoogle Scholar
  50. Pruckner, Gerald J., and Rupert Sausgruber. 2013. Honesty on the streets: a field study on newspaper purchasing. Journal of the European Economic Association 11:661–679.CrossRefGoogle Scholar
  51. Psychonomics (1996). Versicherungsbetrug: Erklärung und Prävention – Die erste Studie zu subjektiven Faktoren des Versicherungsbetrugs, Köln.Google Scholar
  52. Richter, Andreas, Jörg Schiller, and Harris Schlesinger. 2014. Behavioral insurance: theory and experiments. Journal of Risk and Uncertainty 48:85–96.CrossRefGoogle Scholar
  53. Schiller, Jörg. 2006. The impact of insurance fraud detection systems. Journal of Risk and Insurance 73:421–438.CrossRefGoogle Scholar
  54. Schwieren, Christiane, and Doris Weichselbaumer. 2010. Does competition enhance performance or cheating? A laboratory experiment. Journal of Economic Psychology 31:241–253.CrossRefGoogle Scholar
  55. Slemrod, Joel, Marsha Blumenthal, and Charles Christian. 2001. Taxpayer response to an increased probability of audit: evidence from a controlled experiment in Minnesota. Journal of Public Economics 79:455–483.CrossRefGoogle Scholar
  56. Sutter, Matthias. 2009. Deception through telling the truth?! Experimental evidence from individuals and teams. Economic Journal 119:47–60.CrossRefGoogle Scholar
  57. Sutter, Matthias, and Martin G. Kocher. 2007. Trust and trustworthiness across different age groups. Games and Economic Behavior 59:364–382.CrossRefGoogle Scholar
  58. Tennyson, Sharon. 1997. Economic institutions and individual ethics: a study of consumer attitudes toward insurance fraud. Journal of Economic Behavior & Organization 32:247–265.CrossRefGoogle Scholar
  59. Tennyson, Sharon. 2002. Insurance experience and consumers’ attitude toward insurance fraud. Journal of Insurance Regulation 21:35–55.Google Scholar
  60. Tourangeau, Roger, and Ting Yan. 2007. Sensitive questions in surveys. Psychological Bulletin 133(5):859–883.CrossRefGoogle Scholar
  61. Tourangeau, Roger, Lance J. Rips, and Kenneth A. Rasinski. 2009. The psychology of survey response. Cambridge: Cambridge University Press.Google Scholar
  62. Weber, Till Olaf, Jonas Fooken, and Benedikt Herrmann. 2014. Behavioural Economics and Taxation. Brussels: European Commission, Directorate General Taxation and Customs Union.Google Scholar
  63. Weeks, William A., Carlos W. Moore, Joseph A. McKinney, and Justin G. Longenecker. 1999. The effects of gender and career stage on ethical judgment. Journal of Business Ethics 20(4):301–313.CrossRefGoogle Scholar
  64. Wooldridge, Jeffrey M. 2010. Econometric analysis of cross section and panel data, 2nd ed., Cambridge: MIT Press.Google Scholar

Copyright information

© Schmalenbach-Gesellschaft für Betriebswirtschaft e.V. 2017

Authors and Affiliations

  1. 1.Chair in Insurance and Social SystemsUniversity of HohenheimStuttgartGermany
  2. 2.Institute for Organization and HRMBernSwitzerland

Personalised recommendations