Reminding policyholders of their own morality may reduce temptation to commit insurance fraud: behavioural economist

Research on cheating relevant to insurance fraud indicates a lot of people cheating a little bit is much more costly to society than a few people who cheat a lot.
But if insurers are willing to change their approach and remind policyholders about their moral obligations before the purchase, that could help stem the flow of insurance fraud, suggested Dan Ariely, a keynote speaker at the National Insurance Conference of Canada in Montreal.
“Is the cheating around us really driven by bad apples, people who are inclined to cheat a lot?” Ariely asked in his keynote speech. “Or is it driven by lots of people cheating a little?”
Ariely said research studies suggest about 10% of people in any given sample size cheat.
He conducted his own research in which people wrote a test. The test subjects were asked to solve as many puzzles as they could in five minutes.
After five minutes, they were asked to stop writing the test, shred their test results and throw them away. Then they were asked to report the number of puzzles they completed.
Unbeknownst to the research subjects, the researchers knew exactly how many puzzles their subjects had actually finished.
“What happens?” Ariely asked, assuming the researchers paid $150 to each person who cheated on the test. “Lots of people cheated just slightly.
“Of 20,000 people tested, 10 people cheated a lot and made about $150 per person. But of the 20,000 people, about 1,000 cheated a little and they stole $30,000 from us.
“So if you look in comparison, the big cheaters are a tiny drop in the bucket compared to those who cheated a little.”
Ariely said to change behaviours, insurers would be wise to remind policyholders of their moral obligations at some point early in the purchasing process.
For example, insurance policyholders might be asked prior to the insurance purchase if they would be willing to sign a document committing them to contribute money to the creation of an anti-fraud task force. [This was not Ariely’s example, but analogous to it.]
By committing to do this in advance of the purchase, Ariely suggested, those agreeing to do this would in fact not cheat as a result.
“If you remind them about their own morality, there’s a chance they will cheat less.”