Auditing claims in the insurance market with fraud: The credibility issue

• 成果类型: Article
• 署名作者: Picard, P
• 署名单位: Universite Paris Nanterre
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/0047-2727(95)01569-8
• 发表日期: 1996
• 页码: 27-56
• 关键词: insurance; FRAUD; audit; credibility; COMMITMENT

摘要

This paper characterizes the equilibrium of an insurance market where opportunist policyholders may file fraudulent claims. We assume that insurance policies are traded in a competitive market where insurers cannot distinguish honest policyholders from opportunists. The insurer-policyholder relationship is modelled as an incomplete information game, in which the insurer decides to audit or not. The market equilibrium depends on whether insurers can credibly commit or not to their audit strategies. We show that a no commitment equilibrium results in a welfare loss for honest individuals, which may even be so large that the insurance market completely shuts down. We also show that transferring monitoring costs to a budget-balanced common agency would mitigate the commitment problem.