Page 1 of 10
Archives of Business Research – Vol. 9, No. 6
Publication Date: June 25, 2021
DOI:10.14738/abr.96.10346. Pathmananathan, P. R., & Aseh, K. (2021). Identying Factors That Influences Fradulences in Non-Life Insurance Companies. Archives
of Business Research, 9(6). 93-102.
Services for Science and Education – United Kingdom
Identying Factors That Influences Fradulences in Non-Life
Insurance Companies
P. Ravindran Pathmananathan
Unies Group
Khairi Aseh
Unies Group
ABSTRACT
Insurance fraud is the most common form of fraud in the world, aside from tax
evasion. By its very existence, the insurance industry is prone to deception. Basic
income levels in Vietnam have a tendency to steadily rise as a result of improving
socioeconomic conditions. As a result, the need for citizen security has increased
and become more diverse.The aim of this study is to study the predictor/s of anti- insurance fraud among non-insurer companies in Vietnam. This study was
conducted using a questionnaire that was completed by 51 employees who are
currently working in the 11 non-life insurance company in Vietnam. It can be
concluded that there exists a significant relationship between all the four
independent variables which are namely external regulations, public context,
management functions as well as underwriting guidance.
Keywords: Insurance fraud, external regulations, public context, management function,
Vietnam
INTRODUCTION
Insurance fraud of all kinds is on the rise, and its frequency has risen by roughly 30% in many
cases compared to previous years (Burnham,2008). According to a study Submitted to the
Pennsylvania Insurance Fraud Prevention Authority, the number of fraud claims filed with
insurance providers rose by 33% in the first decade of the twenty-first century, with auto
insurance accounting for 72 percent of fraudulent claims (Burnham, 2008).
According to Burnham (2008), insurance firms paid out an estimated $28.4 million in
restitution as a result of fraud in 2008. In 2008 too, 4,000 people were arrested as a result of
20,911 insurance fraud prosecutions, resulting in $1.9 million in civil fines. These investigations
have resulted in the avoidance of over $102 million in possible victim property loss as a result
of fraud, according to the author (Burnham, 2008). It is estimated that up to 10% and 20% of
all car insurance and home owners insurance claims, respectively, are fraudulent (Burham,
2008).
Insurance Fraud Overview
Insurance is a risk-management scheme that necessitates the retention of liquid assets in the
form of reserve funds, which can then be used to pay loss claims. Insurance premiums provide
a constant and large supply of cash to insurance firms. Consistent cash flow is a valuable
Page 2 of 10
94
Archives of Business Research (ABR) Vol. 9, Issue 6, June-2021
Services for Science and Education – United Kingdom
economic resource that can be quickly diverted. Insurance firms are tempting targets for
takeover and loot schemes because of their large stockpiles of liquid assets (Glink,2009).
Insurance Fraud In Vietnam
Basic income levels in Vietnam have a tendency to steadily rise as a result of improving
socioeconomic conditions. As a result, the need for citizen security has increased and become
more diverse. Purchasing insurance is one of the most important safety strategies, and car
insurance is one of the insurance products. According to the Review of Finance (ROF) 2017, the
demand for non-life insurance in general, and vehicle insurance in particular, has expanded
rapidly, but at a modest scale, with insurance premiums as a percentage of GDP of less than 2%.
(while the rate in other countries by region is 7-8 percent ).
Insurance Fraud (Global)
Insurance fraud costs the United States more than $80 billion per year (Taylor, 2014). Fraud
comes in several types, and according to a report conducted by the North Carolina Department
of Insurance (2011), at least one tenth of all auto and homeowners insurance claims are false.
This level of fraud incurs costs in the form of higher premiums for customers and increased
operating costs for insurance providers, totaling billions of dollars for insurers (AIPSO, 2009).
RESEARCH OBJECTIVE
• To profile the respondents’ characteristics among the non-insurer companies in
Vietnam
• To examine the perceived external regulations aspect among the non-insurer companies
in Vietnam
• To examine the perceived public context aspect among the non-insurer companies in
Vietnam
• To examine the perceived management functions aspect among the non-insurer
companies in Vietnam
• To examine the perceived underwriting guidance aspect among the non-insurer
companies in Vietnam
LITERATURE REVIEW
External Regulations
Vietnam's economy continues to improve. Many Vietnamese have already been brought out of
poverty as a result of economic development. Simultaneously, the middle class is growing. WTO
membership has provided Vietnam with access to both foreign markets and capital, as well as
strengthened Vietnamese businesses, especially insurance businesses, through increased
competition.
Many foreign insurance companies (particularly in the life segment) have offices in Vietnam
and regard the country as a natural extension of their regional or global operations. New
products are in the works. The creation of agency networks is underway.Local businesses have
usually displayed more price restraint than their counterparts elsewhere in the area in the non- life market. In Vietnam, motor insurance, this is mostly a thankless and profitless line in
emerging markets, accounts for around a third of non-life premiums written.
Page 3 of 10
95
Pathmananathan, P. R., & Aseh, K. (2021). Identying Factors That Influences Fradulences in Non-Life Insurance Companies. Archives of Business
Research, 9(6). 93-102.
URL: http://dx.doi.org/10.14738/abr.96.10346
Public Context
Anti-fraud procedures are often viewed differently by a diverse group of people in various
public contexts (Secovnie, 2008). Customers for insurance fall into a variety of categories,
which results in a dynamic level of response to anti-fraud procedures.Customers' history,
including their place of birth, education, and wages, all play a role in deciding their degree of
interest in insurance claim fraud (Glink, 2009).
Management Functions
Companies' management roles also assigned responsibility for handling insurance fraud to
each of the company's hierarchy. The Board of Directors and Audit Committee play an
important role in anti-fraud efforts across the insurance industry (Rice, 2008).The Board of
Directors is made up of all of the company's directors, and it serves as the company's highest
decision-making and policy-making body.According to Rice (2009)'s research, the executive
committee and division managers play an important role in anti-fraud procedures. Internal
audit teams are crucial in monitoring and overseeing the execution of anti-fraud procedures.
(2009, Glink)
Underwriting Guidance
Underwriting guidelines is a practical approach to developing a successful anti-fraud procedure
in which the authorities as well as the association of insurers have specific guidance that
standardises the underwriting process for insuring companies. This can include software that
keeps track of customer records and claims history, which is useful in detecting fraud.
Insurance fraud is estimated to cost the insurance industry billions of dollars per year, and it
has thus become a major concern for both insurers and the general public (Glink, 2009; Rice,
2008; Scafidi, 2010; Scott, 2010; Secovnie, 2008; Tennyson, 2008).Insurance evasion costs
customers up to $400 in additional insurance premiums a year in the case of car insurance
(Auto Insurance Plan Service Office (AIPSO), 2009).
METHODOLOGY
For this study, 51 employees have participated who are currently working in the 11 non-life
insurance company in Vietnam. The selection of sample from the pool of 11 companies, which
are occupied up to 80% non-life market shares in Vietnam by convenient sampling method
from total of 29 non-life insurers companies in Vietnam. For this particular study, the data
gathered by distributing questionnaires to employees.
Page 4 of 10
96
Archives of Business Research (ABR) Vol. 9, Issue 6, June-2021
Services for Science and Education – United Kingdom
RESULT
Descriptive Statistic
Frequency (N) Percentage %
Gender
Male
Female
47
4
92.2%
7.8%
Age group
21-30
31-40
41-50
51-60
6
31
12
2
11.8%
60.8%
23.5%
3.9%
Education Level (Highest degree)
University/College
Master
38
13
74.5%
25.5%
Insurance company which you work in
PTI
UIC
MIC
BIC
Baolong
BSH
Liberty
8
1
10
12
10
8
2
15.7%
2%
19.6%
23.5%
19.6%
15.7%
3.9%
Your department
Board of director
Underwriting Department
Los Surveyor Department
Claim Department
Internal Audit
Operation Department
5
5
15
21
2
3
9.8%
9.8%
29.4%
41.2%
3.9%
5.9%
External regulations – regulations to insurance frauds
Table 4.2 Itemized Questions for External Regulations, in Percentage
No Statements 1 2 3 4 5
1.1
1.2
1.3
1.4
1.5
Criminal Code 2015 has created the legal
corridor for anti frauds in insurance.
By-law documents relating to anti-frauds
are clear and easy to follow.
You know well the penalty by the amount
of fine and the number of years of
imprisonment stipulated for insurance
frauds.
The communication and Media have
broasdcasted criminal code relating to
insurance frauds to insurance participants.
People are well aware of the relation
between Crimial Penalty and Insurance
frauds.
5.9%
7.8%
9.8%
17.6%
25.5%
7.8%
17.6
2.0%
37.3%
47.1%
33.3%
43.1%
27.5%
29.4%
17.6%
37.3%
29.4%
45.1%
9.8%
5.9%
15.7%
2.0%
15.7%
5.9%
3.9%
*Note: 1: Strongly Disagree, 2: Disagree, 3: Neutral, 4: Agree, 5: Strongly Disagree
Page 5 of 10
97
Pathmananathan, P. R., & Aseh, K. (2021). Identying Factors That Influences Fradulences in Non-Life Insurance Companies. Archives of Business
Research, 9(6). 93-102.
URL: http://dx.doi.org/10.14738/abr.96.10346
Public context impacts in insurance frauds
Itemized Questions for Public context, in Percentage
No Statements 1 2 3 4 5
2.1
2.2
2.3
2.4
2.5
Customers in city have higher interests in
insurance claim frauds rather than
customers in countryside.
Customers with higher income normally
have less interests in insurance claim
frauds.
Customers with higher education
normally have less interests in insurance
claim frauds.
Regression circle of business is also a
reason leading to insurance frauds.
Culture and social behaviors could be a
reason leading to insurance frauds.
7.8%
11.8%
7.8%
5.9%
0.0%
13.7%
37.3%
31.4%
13.7%
9.8%
21.6%
35.3%
35.3%
31.4%
21.6%
31.4%
9.8%
21.6%
37.3%
52.9%
25.5%
5.9%
3.9%
11.8%
15.7%
*Note: 1: Strongly Disagree, 2: Disagree, 3: Neutral, 4: Agree, 5: Strongly Disagree
Management functions impacts in insurance frauds
Itemized Questions for Management functions, in Percentage
No Statements 1 2 3 4 5
3.1
3.2
3.3
3.4
3.5
Your company has ordained the
responsibility to each of company's hierachy
in managing insurance frauds.
Board of Directors and Audit Committee play
an important role in anti fraud.
Executive committee and branches'
managers play an important role in anti
fraud.
Internal Audit team play an important role in
controlling and supervising the
implementation of anti fraudulent
procedures.
It is necessary to have an award policy to
managers in automobile insurance claim
anti-frauds.
0.0%
2.0%
2.0%
3.9%
0.0%
17.6%
13.7%
11.8%
7.8%
7.8%
21.6%
37.3%
13.7%
33.3%
17.6%
41.2%
33.3%
43.1%
39.2%
43.1%
19.6%
13.7%
29.4%
15.7%
31.4%
*Note: 1: Strongly Disagree, 2: Disagree, 3: Neutral, 4: Agree, 5: Strongly Disagree
Page 6 of 10
98
Archives of Business Research (ABR) Vol. 9, Issue 6, June-2021
Services for Science and Education – United Kingdom
Underwriting guidance impacts in insurance frauds
Itemized Questions for underwriting guidance, in Percentage
No Statements 1 2 3 4 5
4.1
4.2
4.3
4.4
4.5
The undewriting guidance are clear
and suitable to automobile practices.
You comply with the guidance in
underwriting automobile insurance.
If underwriting employees carry out
strictly of underwriting process, it
helps reducing frauds.
Company has software to record the
information of customers and
automobile claim history which is
helpful to anti-frauds.
The connection of information among
insurance companies help managing
client's history and help anti frauds.
2.0%
0.0%
2.0%
2.0%
9.8%
5.9%
7.8%
0.0%
7.8%
0.0%
27.5%
17.6%
11.8%
17.6%
11.8%
39.2%
45.1%
35.3%
35.3%
39.2%
25.5%
29.4%
51.0%
37.3%
39.2%
*Note: 1: Strongly Disagree, 2: Disagree, 3: Neutral, 4: Agree, 5: Strongly Disagree
Multiple regression analysis
Result for Multiple Regression
Model Summary
Model R R Square
Adjusted R
Square
Std. Error of the
Estimate
1 .860a .739 .704 2.13406
a. Predictors: (Constant), External Regulations, Public Context, Management function,
Underwriting Guidance, Claim Procedure, Business Operation Management
ANOVAa
Model
Sum of
Squares df Mean Square F Sig.
1 Regression
Residual
Total
568.242
200.385
768.627
6
44
50
94.707
4.554
20.795 .000b
a. Dependent Variable: Anti-Insurance Fraud
b. Predictors: (Constant), External Regulations, Public Context, Management function,
Underwriting Guidance, Claim Procedure, Business Operation Management
Page 7 of 10
99
Pathmananathan, P. R., & Aseh, K. (2021). Identying Factors That Influences Fradulences in Non-Life Insurance Companies. Archives of Business
Research, 9(6). 93-102.
URL: http://dx.doi.org/10.14738/abr.96.10346
Coefficientsa
Model
Unstandardized
Coefficients
Standard
Coefficients
B t Sig.
Std.
Error Beta
1 (Constant)
External Regulations
Public Context
Management function
Underwriting Guidance
1.358
-.011
-.140
.510
.131
2.052
.087
.104
.120
.157
-.011
-.118
.500
.135
.661
-.126
-1.344
4.255
.836
.512
.900
.186
.000
.408
Dependent Variable: Anti-Insurance Fraud
CONCLUSION
The goal of this quantitative study was to determine which anti-fraud protocols should be used
when handling auto insurance claims. Awareness of claims processes and procedures will aid
in the development of procedures to enhance non-life insurers' anti-fraud policies.This will
invariably result in less financial losses and more effective and efficient fraud case
management. This research might provide insurance companies with a checklist or guideline
for improving their corporate governance policies.
Fifty-one people replied to the survey, all of whom worked in the insurance industry and had
more than 15 years of experience investigating insurance fraud. A series of 15 questions were
asked of the participants to gain insight into their interactions with insurance fraud and claim
processes. The findings proved that there exists a significant relationship between all the four
independent variables which are namely external regulations, public context, management
functions as well as underwriting guidance.
RECOMMENDATION
Person and organisational communication among all parties involved in an insurance fraud
investigation must improve. From the start of the investigation, communication should be open
and comprehensive, and information sharing should continue until the case is closed.Both
parties involved in these cases should be aware of the potential for Group Think to affect
communication and decision-making, and steps should be taken to minimise its effect. Since
this was a small study with only 51 participants, the results are likely to be limited. The
participants, on the other hand, came from a wide range of backgrounds, including all 11
insurance firms, and had years of experience investigating insurance fraud. Furthermore,
despite the fact that the findings only contained a small number of views and experiences, the
knowledge is important to everyone concerned.
LIMITATION
This study's shortcomings, like many others, include the significant drawback of having one- time users as well as non-life insurance users as users of this programme in this study. The
Page 8 of 10
100
Archives of Business Research (ABR) Vol. 9, Issue 6, June-2021
Services for Science and Education – United Kingdom
second restriction is that the respondents are limited to only those from Vietnam region.With
this constraint, there is a possibility of bias in the responses to the questions in terms of the
localised interpretation of the problem.
References
Abramvosky, A. (2008).An unholyalliance: perceptions of influencein insurancefraud prosecutions and the need
forreal safeguards. TheJournal of Criminal Law& Criminology, 98(2), 363-399. doi:0091-4169/08/9802-0363.
Ahlfinger, N. R.,&Esser, J.K. (2001). Testingthe Group Think model: effects of promotional leadership and
conformity predisposition.Social Behavior and Personality, 29(1), 31-42.
Al-Hussaini, S. H., Turi, J. A., Altamimi, A. N. A., Khan, M. A., & Ahmad, M. (2019). Impact of talent management
strategies on employee performance behaviour with the mediating role of talent management outputs. Archives
of Business Research, 7(3).
Alonso, C. (2006, June). Impostor fraudand incontestabilityclauses in lifeinsurance policies. TheFlorida Bar
Journal68-73.
AIPSO (2009). Auto insurancefraud: it’s everyone’s business. Johnston, RI:AIPSO. Retrieved from
https://www.aipso.com/Portals/0/Fraud/SIUTrifold-WebLayout2.pdf
Backstrom, J. C. (1998, January29).InsuranceFraud: A prosecutor’s perspective.1998
Browne, J. Z. (2002, November28). Auto insurancefraudringbusted.TheNewYork
Amsterdam News,6-7.
Burnham, R.W. (2009).Testimonyon insurancefraud presented to HouseInsurance
Butler, J.C., Cohen, M.L., Friedman, C. R., Scripp, R.M., &Watz, C.G. (2002).Collaboration between public health and
law enforcement: new paradigms and partnerships for bioterrorism planning and response. Emerging Infectious
Diseases, 8(10), 1152-1158.
Cherny,A., O’Reilly, J., &Grabosky, P. (2006).The multi lateralization of policing: the case of illicit synthetic drug
control. Police Practice and Research, 7(3), 177-194.
Cole, C. R., &McCullough, K.A.(2007). A review of some possible solutions to the uninsured motorist
problem.CPCU Journal,60(2), 1-10.
Dalrymple, T. (2005, January10). Why fraud goes unpunished. New Statesman,21-22.
Dittenhoefer, M. M.(2007). Yes, Virginia, thereis auto insurance fraud! Retrieved from
http://library.findlaw.com/2007/Jan/1/247186.html
Duffey, W. S. (2003). Public health and lawenforcement: intersectinginterests,
collegialityandcooperation.ThePublic’s Health and the Law in the21st Century, 32(s4),19-24.
Eidsmore, D. (2003).Insurancecallcentersandfraud investigation: whatrole can customer servicetapes servein
fraud prosecution.CPCU eJournal,56(3), 1-10.
Fritscher,L. (2014, June27). Group Think -Definition. Retrieved from
http://phobias.about.com/od/glossary/g/Group Thinkdef.html
Glink,I. R. (2009).Reportsmortgagefraud and mortgage scams increasein 2008.Retrieved
fromhttp://www.thinkglink.com/article/2009/07/20/fbi-reports- mortgage-fraud-and-mortgage-scams- increase-in-2008
Hall, J., Mercy, J.A., Dammers, K., Scripp, R.M., Daughtry, S., & Goodman, R.A. (2010). Public health andlaw
enforcement: futuredirections.The Journal of Law, Medicine & Ethics, 32(s4)52-57.
Hellman, Y. (2009). An innovative partnership of law enforcement and higher education.
FBILaw Enforcement Bulletin,78(2)6-12.
Page 9 of 10
101
Pathmananathan, P. R., & Aseh, K. (2021). Identying Factors That Influences Fradulences in Non-Life Insurance Companies. Archives of Business
Research, 9(6). 93-102.
URL: http://dx.doi.org/10.14738/abr.96.10346
Hillison, W.,Sinason, D., Carson, J.M., &Marlett, D.C. (2000). Theinsurancefirm internal auditor as fraud-buster.
CPCU Journal,53(3),168-181.
Holgersson, S., &Gottschalk, P. (2008). Policeofficers’professional knowledge.Police
Practiceand Research, 9(5), 365-377. doi:1080/15614260801980802
Hoyt, R. E., Mustard, D.B., &Powell,L. S. (2004). The effectiveness ofstatelegislation in mitigating moral hazard:
evidencefrom automobileinsurance. Retrievedfrom http://129.3.20.41/eps/ri/papers/0501/0501001.pdf
InsuranceResearch Council. (2002).Fighting insurancefraud—surveyof insurer anti- fraud efforts. Retrieved from
http://www.iso.com/Research-and- Analyses/Studies-and-Whitepapers/Fighting-Insurance-Fraud-Survey-of-Insurer- Anti-Fraud-Efforts.html
Kang, H.B. (2001).Fightinginsurancefraud inIllinois: insurers, regulatorsand consumers. CPCU Journal,54(4),198-
213.
Karsjens, K.L.(2004). Enforcement of the privacyruleas related to physician deception to insurance
companies.TheAmerican Journal ofBioethics, 4(4), 79-82.
Kiegher, S. M. (2001). Communication in the evolvingworld ofcasemanagement.
Health&SocialWork, 25(4), 227-232.
Kreidler, M. (2008). Report on theinsurancecommissioner’s special investigations unit.,September, 1-7.
Levine, E. (2009). Policing goes online. Retrievedfromhttp://www.onlinemag.net
Marx, G. T. (1987). The inter weaving of public and private police undercover work.InC.
Shearing & P. Stenning (Eds.), Private Policing (pp 172-193). NewYork, NY: Sage Publications. Retrieved
fromhttp://web.mit.edu/gtmarx/www/private.html
Morley,N. J., Ball,L.J., & Ormerod, T. C. (2006). How the detection of insurance fraud succeeds and fails.
Psychology, Crime and Law, 12(2), 163-180. doi:10.1080/10683160512331316325
Packer, D. J. (2009). AvoidingGroup Think. Psychological Science, 20(5),546-549. Palasinski, M. (2009). Testing
assumptions about naivety in insurance fraud. Psychology, Crime & Law, 15(6), 547-553.
doi:10.1080/10683160802392444
Plachta, M. (2005). Jointinvestigation teams.European Journal of Crime, Criminal Law and CriminalJustice, 13(2),
284-302.
Puonti, A. (2004). Tools for collaboration: usingand designingtools in interorganizational economic- crimeinvestigation.Mind, Cultureand Activity, 11(2), 133-152.
Redorbit.com. (2010). Law enforcement, auto insurer partner in major crackdown on staged car crashes. Retrieved
from
http://www.redorbit.com/news/business/1857631/law_enforcement_auto_insurer_partner_in_major_crackdo
wn_on_staged/index.html
Rice, T. (2008). Insurance fraud negating accountability. Retrieved, from
http://www.ahrc.com/new/index.php/src/news/sub/article/action/ShowMedia/id/4200
Richard, M., &Lebl,L.S. (2009). Securityand data sharing.PolicyReview,154(2009 04
01), 79-94.
Richards, E. P. (2002). Collaboration between publichealth and lawenforcement: the constitutional
challenge.Emerging Infectious Diseases, 8(10), 1157-1161.
Ryan,L.(2012, May1).Recognizing andavoiding group think. Retrievedfrom
http://www.business2community.com/strategy/recognizing-and-avoiding-Group Think-0172190
Scafidi, F. (2010). Rise in suspicious haildamage claims. Retrieved from https://www.nicb.org/newsroom/news- releases/rise-in-suspicious-hail-damage-claims
Page 10 of 10
102
Archives of Business Research (ABR) Vol. 9, Issue 6, June-2021
Services for Science and Education – United Kingdom
Scott, G. M. (2010). Auto insurancefraud on therise: is the economyto blame?
InsWeb.com. Retrievedfromhttp://www.insweb.com/news-features/auto- insurance-fraud-on-rise.html
Secovnie, R. (2006).Insurance fraud—companies, producers and policy holders. NYCS- 211764. InsuranceTraining Institute, Inc. from http://www.iti-ny.com/ifcpphbook3-1-06.pdf
Simmons, K. C. (2008).Thepolitics of policing:ensuringstakeholdercollaboration in the federal reform of local law
enforcement agencies.The Journal of Criminal Law&Criminology, 98(2), 489-539. doi:0091-4169/08/9802-0489
Snyder,D. F. (2005). Proven measures to reduceauto insurance costs, increase choices and expand
competition.Maryland Auto InsuranceTaskForce. Retrieved from
http://www.mdinsurance.state.md.us/sa/documents/AIA-MDautotestimony-101805.pdf
Taarud, N.L.(2006).Insurance fraud bureau: does Wisconsin really need one? Journal of Economic Crime
Management, 4(2). Retrieved from
http://www.utica.edu/academic/institutes/ecii/publications/articles/51D7BD77- A6D1-683B- 768C71F19F3DE9D4.pdf
Taylor, A. (2014).(2014).Insurancefraud laws and penalties. NOLO. Retrieved from
http://www.criminaldefenselawyer.com/crime-penalties/federal/Insurance-Fraud.htm
Tennyson, S. (2008). Moral, social and economic dimensions of insurance claims fraud.
SocialResearch, 75(4), 1181-1206.
Troyer,L.,&Youngreen, R. (2009). Conflict and creativityin groups.Journal ofSocial
Issues, 65(2), 409-427.
Weber, E. P.,Lovrich, N.P., &Gaffney, M. (2005). Collaboration, enforcement and endangered species: aframework
forassessingcollaborativeproblem-solving