business problem statement

Australian attitudes towards Insurance Fraud: exploring impacts and implications for fraud

prevention strategies

Subject BUSN20016 – Research in Business

Assessment 1 Project Outline

Due Date ** ** ****

Student Name: ON-CAMPUS STUDENT 2

Student Number *********

Table of Contents 1. Introduction .................................................................................................................................... 3

2. Aim and Objectives ......................................................................................................................... 4

3. A brief methodology ....................................................................................................................... 4

3.1 Comprehensive literature review ............................................................................................. 4

3.2 Quantitative and qualitative data ............................................................................................. 4

3.3 Survey research – self-administered questionnaire ................................................................. 5

3.4 Experiment ................................................................................................................................ 5

4. References .......................................................................................................................................... 6

5. Appendix .............................................................................................. Error! Bookmark not defined.

BUSN20016: Assessment of Assignment 1

Criteria Total marks Marks

Obtained 1. A brief statement of the problem 2.Research aim and objectives 3. A brief methodology 4. Accurate referencing, use of correct English and logical sequences between sentences and paragraphs 5. Topic presentation (for on-campus students)/ topic discussion on the unit Moodle side (for distance mode students)

Total = Penalty for late submission (5% reduction for each day of late submission)

Penalty for high level of Turnitin similarity (Marker/UC decides) GRAND TOTAL =

1. Introduction Insurance fraud, whether this be the padding or exaggeration of legitimate claims (opportunistic

fraud) or the deliberate fabrication of fake claims (premeditated fraud) (Baldock, 1997) costs the

Australian insurance industry an estimated $2.1 billion per year (Smith, Jorna, Sweeney & Fuller,

2011). It is estimated that one out of every 10 claims made involves a fraudulent activity (Insurance

Group Australia, 2004). Akin to many other industries prevention and early detection of fraud is a

critical business activity. However the additional costs and administrative processes associated with

these activities have negative impacts for the customer, insurance agencies and the overall

insurance industry. Customers incur increased cost of insurance premiums, the process of analysing

and approving insurance claims become more complex for both the customer and the insurer and

this impacts upon general customer satisfaction about insurance agencies (KPMG, 2016).

Recent American research identified that up to 24% of Americans surveyed felt it was acceptable to

inflate an insurance claim in order to recoup premiums paid out and that 10% of respondents agreed

that insurance fraud didn’t hurt anyone (Insurance Research Council, 2013). To date no open source

recently published research has been conducted on Australian attitudes towards fraudulent

activities within the insurance industry.

According to the field of behavioural economics people do not always act in a rational manner

(Ariely, 2008), the decision making process is influenced by factors such as personal beliefs, values

and social norms (Tversky & Kahenman, 1974, Thaler & Sustein, 2008). This aids to explain why

people who are normally law abiding citizens decide to exaggerate losses on a legitimate insurance

claim.

The purpose of this research paper is to investigate the full impact of fraud within the Australian

insurance industry; to explore key reasons why people commit fraud and to explore current

Australian attitudes (social norm) towards insurance agencies and insurance fraud. This information

can then be used to assist in developing a targeted public awareness campaign and development of

fraud prevention strategies for the insurance industry.

2. Aim and Objectives The aim of this project is to contribute to the knowledge of why customers commit fraud within the

insurance industry sector in Australia to assist in development of appropriate fraud prevention

strategies. The key objectives of this project are to:

a) Explore the key financial and internal process impacts of customer fraud within the

insurance industry

b) Explore and identify key causes of customer fraudulent behaviours within the insurance

industry

c) Explore social norms/ attitudes about insurance fraud as potential factors in

preventing/encouraging fraudulent behaviours

d) Identify strategies to prevent customer fraud

3. A brief methodology In order to address the project aims and objectives the following a mixed methodology approach is

proposed:

3.1 Comprehensive literature review The first step in developing a clear understanding of the topic at hand is to undertake a

comprehensive literature review on the key research themes i.e. customer fraud, insurance

fraud, decision making, behavioural economics, social norms, attitudes. This review will include

not only published academic papers located via online databases (e.g. EBSCO), but also a review

and analysis of business articles, reports and papers from Australian and International Insurance

Councils, the Australian institute of Criminology and other relevant organisations.

3.2 Quantitative and qualitative data Obtaining and reviewing descriptive data over set period (i.e. 5-10 years) from insurance

agencies on information such as number of insurance claims made; number of suspicious

claims/claims investigated/ claims rejected (and reasons); number of confirmed customer fraud

claims; data on yearly changes in fraud premiums, customer satisfaction and customer

complaints. Additionally qualitative information will also be sought from insurance agencies

regarding fraud prevention and detection strategies, including additional costs of implementing

systems, the additional processes required to process claims and impacts upon for example,

employee job satisfaction. This information is relevant as it is important to recognise that fraud

prevalence may not be an indicator of increased customer fraudulent activities but improved

detection methods.

3.3 Survey research – self-administered questionnaire Following the literature review it is proposed that customer surveys be conducted with the

Australian public focussing upon attitudes towards insurance industry to enhance understanding

of the issue at hand. Given the sensitive nature of the surveys (i.e. important not to infer the

respondent has committed fraud or that fraud is the social norm) the question format and how

the questions are phrased will need to be carefully considered. It is also recommended that the

surveys be conducted anonymously collecting only demographic data such as age range, gender,

and location to aid in identifying trends.

3.4 Experiment To further ascertain the impact of influencing factors such as social norms on customer decision

making, an experiment is proposed. Propose comparing results from a control group to two

intervention groups, each given scenarios with different social norm information. Comparisons

could then be made between responses of the control and interventions groups to ascertain if

there were statistically significant differences between how people responded to the questions.

Although this type of experiment occurs in a contrived setting, given the nature of the topic at

hand it would be very challenging to set up a reliable and controlled experiment within a natural

environment. Sample sizes and sampling approach would need to be carefully considered to

ensure representative of the population.

4. References

Ariely, D (2008). Predictably Irrational, Harper Collins.

Baldock, T (1997). Insurance Fraud. Australian Institute of Criminology – trends and issues in crime

and justice. Retrieved from

http://aic.gov.au/media_library/publications/tandi_pdf/tandi066.pdf

Insurance Group Australia (IGA) (2004). Hidden costs: Insurance fraud in Australia. Written in

cooperation with the Economist Intelligence Unit. Australia: IGA

Insurance Research Council (2013) Insurance Fraud: A Public View, 2013 Edition. Retrieved from

http://www.insurancefraud.org/downloads/InsuranceResearchCouncil02-15.pdf

KPMG (2016) General insurance survey 2016 Retrieved from

https://home.kpmg.com/au/en/home/insights/2016/10/general-insurance-industry-review-

2016.html

Smith, RG, Jorna, P. Sweeney, J. Fuller, G (2011). Counting the costs of crime in Australia: A 2011

estimate. Australian Institute of Criminology (AIC Reports Research and Public Policy Series

129). Retrieved from

http://www.aic.gov.au/media_library/publications/rpp/129/rpp129.pdf

Thaler, R. H, & Sustein, C. R, (2008), Nudge improving decisions about health, wealth and happiness, Penguin books, London.

Tversky, A & Kahneman, D, (1974), Judgement under uncertainty: heuristics and biases. Science, Vol 184 (4157), 1124-1131.