Does Opportunistic Fraud in Automobile Theft Insurance Fluctuate with the Business Cycle?
39 Pages Posted: 27 Jul 2011
Date Written: July 25, 2011
We analyze the empirical relationship between opportunistic fraud and business cycle. We find that residual opportunistic fraud exists both in the contract with replacement cost endorsement and the contract with no-deductible endorsement in the Taiwan automobile theft insurance market. These results are consistent with previous literature on the relationship between fraud activity and insurance contracting. We also show that the severity of opportunistic fraud fluctuates in the opposite direction to the business cycle. Opportunistic fraud is stimulated during periods of recession and mitigated during periods of expansion.
Keywords: Opportunistic fraud, replacement cost endorsement, no-deductible endorsement, automobile theft insurance, business cycle
JEL Classification: G22, G20, D80, D81
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