Typhoons and Opportunistic Fraud: Claim Patterns of Automobile Theft Insurance in Taiwan

Authors

  • Tsung-I Pao,

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    • Tsung-I Pao is a Master's Degree Holder at the Graduate Institute of Finance and Insurance, Tamkang University. Larry Y. Tzeng is a Professor in the Department of Finance, National Taiwan University and a Research Fellow at the Risk and Insurance Research Center, College of Commerce, National Chengchi University. Kili C. Wang is an Associate Professor in the Department of Insurance, Tamkang University and a Research Fellow at the Risk and Insurance Research Center, College of Commerce, National Chengchi University. Kili C. Wang can be contacted via e-mail: kili@mail.tku.edu.tw. The authors gratefully acknowledge helpful comments received from the two anonymous referees and the participants at the 2011 annual meetings of the American Risk and Insurance Associations.
  • Larry Y. Tzeng,

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    • Tsung-I Pao is a Master's Degree Holder at the Graduate Institute of Finance and Insurance, Tamkang University. Larry Y. Tzeng is a Professor in the Department of Finance, National Taiwan University and a Research Fellow at the Risk and Insurance Research Center, College of Commerce, National Chengchi University. Kili C. Wang is an Associate Professor in the Department of Insurance, Tamkang University and a Research Fellow at the Risk and Insurance Research Center, College of Commerce, National Chengchi University. Kili C. Wang can be contacted via e-mail: kili@mail.tku.edu.tw. The authors gratefully acknowledge helpful comments received from the two anonymous referees and the participants at the 2011 annual meetings of the American Risk and Insurance Associations.
  • Kili C. Wang

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    • Tsung-I Pao is a Master's Degree Holder at the Graduate Institute of Finance and Insurance, Tamkang University. Larry Y. Tzeng is a Professor in the Department of Finance, National Taiwan University and a Research Fellow at the Risk and Insurance Research Center, College of Commerce, National Chengchi University. Kili C. Wang is an Associate Professor in the Department of Insurance, Tamkang University and a Research Fellow at the Risk and Insurance Research Center, College of Commerce, National Chengchi University. Kili C. Wang can be contacted via e-mail: kili@mail.tku.edu.tw. The authors gratefully acknowledge helpful comments received from the two anonymous referees and the participants at the 2011 annual meetings of the American Risk and Insurance Associations.

Abstract

We present evidence to support the existence of opportunistic fraud in the automobile theft insurance market in Taiwan. After encountering a typhoon hit, the insured who purchase automobile theft insurance but do not purchase typhoon/flood insurance tend to have a significantly higher probability of filing a total theft claim than other insured. The above relationship exists mainly in places affected by typhoons. Such evidence does not exist in partial theft claim. These claim patterns of automobile theft insurance provide us with strong evidence that supports the existence of opportunistic fraud in the market.

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