Deterring Fraud: The Role of General Damage Awards in Automobile Insurance Settlements

Topics:
Insurance
Tags:
Business Operations,
Corporate Insurance,
Finance,
Financial Planning,
Fraud,
Insurance,
Settlement
Source:
RAND

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Overview: This paper hypothesizes that third-party insurers use general damage awards to reduce the incentive to submit exaggerated claims for specific damages for injuries and lost wages. Consistent with this hypothesis, the paper finds evidence using data on over 15,000 closed bodily injury claims that special damage claims that exceed their expected value receive proportionally lower general damage awards than claims that do not. Among the implications of this research is the possibility that insurers will be less zealous in challenging fraudulent special damage claims in a third-party insurance regime than they will in a first-party insurance regime.

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Format: PDF | Size: 1,157KB | Date: Jun 2003 | Pages: 39

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