Insurance fraud – a national pastime with no side effects? Ethical standards and economic gain in a selected dilemma

When most people think of a ‘fraudster’, they undoubtedly picture an unscrupulous white-collar criminal who unlawfully enriches himself by exploiting the ignorance of others. In certain insurance sectors, however, 25–40 per cent of claims are considered to be fabricated or manipulated. Consequently, there would be a great many insurance fraudsters amongst us. Is insurance fraud really such a ‘national pastime’?

Insurance fraud is often not regarded as a criminal act, but as a ‘minor offence’. No wonder, given that insurance fraudsters lack any sense of wrongdoing and deny or play down the damage: ‘It doesn’t really hurt the insurance company, does it?’. But what constitutes potential material and non-material damage? And how much does it amount to?

Nobody likes to be the victim of fraud, and everyone undoubtedly has the right to protect themselves against it. Are insurance companies doing enough to safeguard the insured community from insurance fraud? Or are they doing too little, thereby fuelling the impression that the honest person is the fool? In any case, it is astonishing how little the insurance industry addresses the issue of ‘insurance fraud’ in public. Is it a case of not wanting to wake sleeping dogs?

This ethos module encourages economic and ethical reflection on insurance fraud from the perspective of an outside observer. In contrast to the perspective of the directly involved party (the ‘fraudster’) or the victim (‘the defrauded’), this facilitates a neutral and rational analysis and assessment of the facts. The ethos module addresses the following questions:

What causes and motives contribute to insurance fraud?
Why is the moral threshold for committing insurance fraud often low?
Who is harmed by insurance fraud? In what way?
What measures can insurers take to prevent fraud?
How do insurers detect insurance fraud?
What are the consequences for the dishonest policyholder if the fraud is uncovered?

Two typical, everyday (insurance) cases have been prepared for teaching purposes. A situational analysis is carried out to identify the incentives for action and the relevant criminal law provisions. The case study culminates in a moral judgement on the appropriate course of action. Optionally, a practical visit to an insurer can be arranged to explore the practical aspects of detecting and combating insurance fraud.

Curriculum relevance: The topic of ‘personal insurance’ falls within the sphere of essential public services, the fundamental importance of which for economic education is undisputed, as it plays an ever-greater role in the lives of every individual. This module fills a gap in the area of financial education, which is often still given insufficient attention in school curricula as a whole.