Does Opportunistic Fraud in Automobile Theft Insurance Fluctuate with the Business Cycle?

39 Pages Posted: 27 Jul 2011

See all articles by Georges Dionne

Georges Dionne

HEC Montreal - Department of Finance

Kili C. Wang

Tamkang University

Date Written: July 25, 2011

Abstract

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

Suggested Citation

Dionne, Georges and Wang, Kili C., Does Opportunistic Fraud in Automobile Theft Insurance Fluctuate with the Business Cycle? (July 25, 2011). Available at SSRN: https://ssrn.com/abstract=1894738 or http://dx.doi.org/10.2139/ssrn.1894738

Georges Dionne (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6596 (Phone)
514-340-5019 (Fax)

HOME PAGE: http://www.hec.ca/gestiondesrisques/

Kili C. Wang

Tamkang University ( email )

No.151, Yingzhuan Rd
Taiwan, Taipei Hsien 25137
China

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