Loss Risk Through Fraud in Car Insurance
XREAP No. 2011-07
27 Pages Posted: 3 Jun 2011 Last revised: 7 Jun 2011
Date Written: April 1, 2011
Our objective is to analyse fraud as an operational risk for the insurance company. We study the effect of a fraud detection policy on the insurer's results account, quantifying the loss risk from the perspective of claims auditing. From the point of view of operational risk, the study aims to analyse the effect of failing to detect fraudulent claims after investigation. We have chosen VAR as the risk measure with a non-parametric estimation of the loss risk involved in the detection or non-detection of fraudulent claims. The most relevant conclusion is that auditing claims reduces loss risk in the insurance company.
Keywords: fraudulent claims, operational risk, claims auditing, risk measure, non-parametric estimation
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