Consumer Insurance Fraud/Abuse as Co-creation and Co-responsibility: A New Paradigm

Estimates of inefficiencies in the US property–casualty market vary widely, depending upon measurement and methods (Lesch and Byars 2008), although the Coalition Against Insurance Fraud (CAIF) recently valued economic losses suffered by the US property–casualty segment of the industry at $80 billion annually (Coalition Against Insurance Fraud 2008). This number may understate the current situation as a result of the ongoing economic recession (Hays 2010; National Insurance Crime Bureau 2009; Towers Watson 2010). Moreover, it has been suggested by various sources that between 3 and 10% of the $2.3 trillion expended by US public and private health care entities in 2007 were based in fraudulent claims, a minority of this attributable to actual patient behavior (Rosenbaum et al. 2009; Federal Bureau of Investigation 2009). Comparatively, the US Internal Revenue Service reported that the tax gap—that amount of tax owed but unreported and unpaid—was (after enforcement and collection activities) about $290 billion in 2005 (The Department of the Treasury 2009).

The problem of insurance fraud/abuse is the subject of international concern as well (e.g., Montia 2007; Ipsos-Mori 2005; Jou and Hebenton 2007; Lincoln et al. 2003; Kim and Kwon 2006).

Unfortunately, many authors do not distinguish among the categories and origins of insurance fraud/abuse in estimates of prevalence or valuation. Unless otherwise indicated, fraud/abuse in this article is limited to actions advanced by individual consumers associated with property–casualty claims. Criminal organizations (sometimes referred to as “rings,” or “medical mills”), or other multi-claim fraudulent applications involving multiple actors and levels of organization are excluded from consideration here, but represent serious challenges in their own right. See Quiggle (2010) for examples of the nature and costs associated with criminal enterprise in the auto lines of property–casualty insurance fraud.

See for example http://​www.​insurancefraud.​org/​.

The final version of the multi-state agreement, including signature pages and a corrected state-by-state listing of total auto liability direct written premiums was obtained from the Illinois Department of Insurance, personal correspondence, 26th January 2011.

cf. about “rediscovering the normative roots” of insurance, as responsibility sharing together with risk sharing Brinkmann 2012; Brinkmann and Doyle 2010; Brinkmann 2007. In such a perspective, the insurance business faces new opportunities and challenges at all levels. In the context of descriptive ethics research, the paradigm explaining moral hazard with moral neutralization among both insureds and insurers, is ripe for a similar paradigm change as we have inferred above.

Another approach, more in the descriptive ethics and in the risk perception research traditions, will be the subject of an empirical pilot among insurance company staff with customers in Scandinavia, including customer ethics attributions, perceptions of company co-responsibility for the interaction climate, perhaps also including some ethical climate indicators (see Martin and Cullen 2006; Arnaud 2010).

A combined descriptive ethics and risk perception research approach (cf. note *4 above) has such mutual listening and two-way communication in mind, inviting both sides to self-criticism, to put themselves into the shoes of the counterpart.