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.
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
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
KPMG (2016) General insurance survey 2016 Retrieved from
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
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.
Strategic response towards consumer awareness about health product: the Case study of Subway
The research will centre on the problem of strategic response towards consumer awareness about health product
A case study of Subway was selected for an in- depth analysis
This research will be effective in finding out the importance of strategic response
Consumers will have increased awareness about health product (Honka, Hortaçsu & Vitorino, 2017).
There are different types of research design
Descriptive research design will be suitable in this research (Makanyeza, 2015)
This particular research design will be effective in gathering detailed information by observation, survey and case study
Mixed method will be used in the research to collect both qualitative and quantitative data
Primary sources will be used to gather information from the participants (Mandle et al., 2015)
Data will be collected by interviewing the participants, surveying them through questionnaire and observing their behavioral pattern.
- Honka, E., Hortaçsu, A., & Vitorino, M. A. (2017). Advertising, consumer awareness, and choice: Evidence from the us banking industry. The RAND Journal of Economics, 48(3), 611-646.
- Mandle, J., Tugendhaft, A., Michalow, J., & Hofman, K. (2015). Nutrition labelling: a review of research on consumer and industry response in the global South. Global health action, 8(1), 25912.
- Makanyeza, C. (2015). Consumer awareness, ethnocentrism and loyalty: An integrative model. Journal of International Consumer Marketing, 27(2), 167-183.