Fraud in Insurance

Insurance fraud occurs when the insurer does not know all the facts about the insured and the claim, and when the fraudster believes that some monetary benefits can be gained by distortion of such facts. We explain how fraud can be fought with deterrence and detection, and present several ways to control fraud, specialized investigation units, statistical analysis of claims information, and fraud detection methods, together with the ways for evaluation of their performance and some hints for their practical implementation. Also, we give an overview of the claims handling process. We describe various types of fraud currently encountered in insurance and give examples. Keywords: moral hazard; fraud deterrence; fraud detection; claims handling; auditing

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