Social Attitudes towards Committing Insurance Fraud - Literature review Example

Social Attitudes towards Committing Insurance FraudTheoretical models of attitude formation have been applied in an attempt to explain social attitudes towards committing insurance fraud. Tennyson (1996), applying Crane (1991) and Wilson’s (1987) theories of attitude formation, suggesting that acceptability of committing insurance fraud is born of learned attitudes from their social environment or peer group. In support of this view, the ABI (2013) reported that 38% believed that insurance fraud was a victimless crime and 13% believed that insurance fraud was an easy way to make a “quick buck”.

Doig et al (2001) noted a shift in moral attitudes whereby peer/age group held an effect on the propensity to commit fraud dependant on perceptions of what is right and wrong, not of legality and illegality. Tolerance has also been found towards ‘fiddling’ a claim if the relationship between the insured and the insurer was perceived to be a distant one (Tennyson, 1997). This interpersonal distance was noted by Tennyson to be increased when the insured perceived the insurance premium to be a financially burdensome.

When this issue is coupled with the difficulties firstly in defining fraud, therefore varying record rates between insurers and the fact that often there are no central fraud figures held by companies, and they are often guesstimates, understandably it is a difficult problem to tackle.One of the major problems to managing insurance fraud is because of the social perception that policy holders have over fraud and this has facilitated the crime that is rated the second most frequent among white collar crimes.

Padding of claim amount is the most significant of insurance fraud types and its causes explains the involved social attitudes. Miyazaki (2009 p. 595) explains the role of payable amounts in premiums as a facto towards padding of amount in claims. According to the author, high payable amounts motivate policyholders to pad amount in claims that they perceive to be fair to the amount they paid. This induces a moral justification and establishes padding as a social norm that seeks to reclaim the right value from the insurer.

Policyholders with high ethical standards are however, less susceptible to the moral compromise because of the amount paid in premiums. Consequently, insurance fraud depends on personal morality, a social factor (Miyazaki 2009, p. 595, 596). Report by Insurance Research Council supports the notion of learnt behaviour into insurance fraud and the role of a person’s social environment. Even though the report identified a declining trend in tolerance to insurance fraud, it implies significance of values in sub-cultures and peer influence in tolerance of insurance fraud.

Older people are less tolerant to the fraud while young people report a high tendency to fraud and the need to recover from paid premiums is a driving factor. People’s perceptions towards insurance fraud, especially padding, also explains the social aspect. People also use social justifications to defend their tolerance to fraud and the fact that the fraud does not harm any person is one of the justifications. Higher rates that a policyholder can get from a fraud are another factor and relates to the need to recover paid premiums (Bramlet 2013, p. 9).Experience with insurance covers however improves level of intolerance to fraud and suggest that willingness to commit fraud is not based on reality of the insurance environment.

Individuals who have multiple insurance covers, indicating greater experience with insurers, are less likely to engage in insurance fraud. This suggests their higher-level understanding of the relationship between deductibles and compensation that they could be considering just to eliminate need for fraud. Experience with insurance claims also reduces individual’s willingness to commit insurance fraud and these shows that terms of deductibles and compensations are not the real causes of fraud but social factors (Tennyson 2002, p. 25). Tennyson (2008, p. 1181) explains the role of “social norms and institutional context” in framing an individual’s willingness to engage in insurance fraud.

These are however, social factors and include peer factors into attitudes towards insurance fraud. In addition, the factors into fraud emanates from social set ups such as “neighbourhoods and peer” to mean that the attitudes into fraud are social based because individuals develop the attitudes from their interactions in the social structure (Pickhardt and Prinz 2012, p. 73). Creating a culture of honesty among customers and incorporating moral values into the culture may therefore be a suitable solution to the problem that has social causes.

Reference listBramlet, C 2013, ‘IRC report: Public less tolerant of insurance fraud,’ Claims Vol. 61, No. 5, pp. 9. Miyazaki, A 2009, ‘Perceived ethicality of insurance claim fraud: Do higher deductibles lead to lower ethical standards?’ Journal of Business Ethics Vol. 87, No. 4, pp. 589-598. Pickhardt, M and Prinz, A 2012, Tax evasion and the shadow economy, Edward Elgar Publishing, Cheltenham. Tennyson, S 2002, ‘Insurance experience and consumers’ attitudes towards insurance fraud,’ Journal of Insurance Regulation Vol. 21, No. 2, pp. 35-58. Tennyson, S 2008, ‘Moral, social, and economic dimensions of insurance claim fraud,’ Social Research Vol. 75, No. 4, pp.

1181-1204.