Insurance fraud and abuse—international concerns—are inherent in the proposition of insurance and prevalent in insurer–insured interactions. While the subject of considerable industry and regulatory attention, this little-researched area of consumer behavior and consumer ethics represents persistent social policy questions and problems at multiple levels. This article addresses the issue by first defining insurance fraud and its origins in contract, as well as consumer- and insurer-management. The authors conclude by re-envisioning the problem as one of co-creation by the consumer-insured and insurer (...) personnel, proposing a framework for its study and resolution. (shrink)

For several decades, most discussion on financial fraud has centered on the fraud triangle, which has evolved over time through various extensions and re-interpretations. While this has served the profession well, the articulation of the human side of the act is indirect and diffused. To address this limitation, this research develops a model to explain the role of human desires, intentions, and actions in indulgence of, or resistance to, the act of financial fraud. Evidence from religion, philosophy, sociology, neurology, behavioral (...) economics, and social psychology is integrated to develop and support an alternative fraud model, called the disposition-based fraud model. To articulate the model, its two primary components, disposition and temptation, are further developed and extended. Although the DFM is generally applicable to any act of fraud, this paper focuses on executive fraud. The similarities and differences between the DFM and extant fraud models are discussed. Importantly, in light of the DFM, a re-interpretation of the fraud triangle is made to improve our understanding of the human element in it. Additionally, potential implications of the model for corporate governance are discussed, suggestions for further research are offered, and the DFM’s strengths and limitations are noted. (shrink)

Insurance claim fraud costs insurance companies, policymakers, and taxpayers billions of dollars every year and has been described as the second largest white collar crime. The most common insurance fraud activity and one that contributes a significant portion of dollar losses is the practice of padding claim amounts in the event of a loss. One of the largest issues insurance companies face is that policyholders often do not perceive insurance claim padding as an unethical behavior. However, very little research has (...) examined the factors that contribute to such perceptions. Considering how consumers often attempt to justify fraudulent behavior from a fairness perspective, the present work examines how the amount of the deductible in an insurance claim situation can influence feelings of fairness and ethicality. The results of an experimental study show that higher deductible amounts result in stronger perceptions that insurance claim padding is fair to the insurance company, weaker perceptions that the behavior is unethical, and higher proposed claim award amounts. The study also shows, however, that the deductible amount effects are attenuated for consumers who display higher ethical standards as reflected by their scores on the consumer ethics scale. Implications are discussed with respect to the insurance industry, deviant consumer behavior, and general business ethics theory. (shrink)

The potential for biased responses that occur when researchers interact with their study participants has long been of interest to both academicians and practitioners. Given the sensitive nature of the field, researcher interaction biases are of particular concern for business ethics researchers regardless of their preference for survey, experimental, or qualitative methodology. Whereas some ethics researchers may inadvertently bias data by misrecording or misinterpreting responses, other biases may occur when study participants' responses are systematically influenced by the mere introduction of (...) researchers into the participants' environment. Although substantial empirical research has been conducted on the general topic of researcher interaction biases, none has focused specifically on business ethics research. In order to remedy this lack of empirical substantiation in the field, we review the related literature on researcher interaction biases, present an empirical example of how such biases can influence research results in an experiment assessing reactions to insurance fraud, and discuss the implications for business ethics research. (shrink)

In this paper, we explore the 2008 financial crisis in Iceland through the lens of Donaldson’s concept of normalization of questionable behavior. We study the report published by the Special Investigation Commission, an investigation initiated by the Icelandic Parliament near the end of 2008. The report provides a detailed and systematic account of the processes leading up to the crisis. Our aim is to determine the extent to which the behaviors of professionals in the Icelandic financial sector can be explained (...) as a gradual fading of moral concerns to the point that they perceived the sale of high-risk products to unassuming customers for their own short-term benefit to be morally unproblematic. In doing so, we consider both character and circumstance explanations of moral misbehavior. We expand on Donaldson’s initial description of normalization of questionable behavior by applying the concept of moral neutralization, which is defined by criminologists Sykes and Matza as the process of convincing oneself that an option that initially conflicted with one’s own moral beliefs is actually morally acceptable. We find indications that individuals in the Icelandic financial sector did engage in moral neutralization in their attempts to frame their own actions in an acceptable light. In our study, we identify one way of neutralizing away moral dissonance not captured in the original theoretical framework. Icelandic bankers justified their behavior by claiming that they did not break any relevant rules or regulations when they engaged in what were later labeled questionable activities. Our name for this kind of justification is claim of having breached no rule. (shrink)

Business leaders frequently face dilemmas, circumstances where whatever course of action they choose, something of important value will be offended. How can an organisation prepare its decision makers for such situations? This article presents a pedagogical approach to dilemma training for business leaders and managers. It has evolved through ten years of experience with human resource development, where ethics has been an integral part of programs designed to help individuals to become excellent in their professional roles. The core element in (...) our approach is The Navigation Wheel, a figure used to keep track of relevant decision factors. Feedback from participants indicates that dilemma training has helped them to recognise the ethical dimension of leadership. They respond that the tools and concepts are highly relevant in relation to the challenges that occur in the working environment they return to after leadership training. (shrink)

The insurance industry’s practice of producing comprehensive insurance policies can have unforeseen and negative ethical consequences. Insurance policies express promises from the insurer to the insured, to the effect that the insurer should be trusted to appropriately assist the insured in case of accident. The relation is seriously undermined when the content of the promise is blurred, containing clauses and condition which are ambiguous or hidden in fine print. This paper contains an investigation of (1) the sources of the fine (...) print policy practice, (2) its immediate effects on the degree to which the policies are understandable to the insured, (3) the ethical consequences that can follow from blurring the true content of the insurer’s promise to the insured and (4) the measures insurers can take in order to develop a more constructive ethical relationship with its customers. (shrink)

This study derives an improved model of managers’ decision-making behavior regarding possibly failing projects. Instead of adopting cognitive moral development used by Rutledge and Karim this investigation uses the agency theory framework to consider individual moral philosophy for the improvement of decisions regarding possibly failing projects. This research hypothesizes that a manager with low relativism has a stronger tendency to discontinue a possibly failing project than one with high relativism when agency problem are present or absent. Also, this study suggests (...) that a manager with high idealism has a stronger tendency to discontinue a possibly failing project than one with low idealism. Through experiments this work finds that agency problem is a significant factor on decisions regarding possibly failing projects in all circumstances. This result is consistent with prior literature and shows agency problem universality. Next, the empirical evidence supports the hypothesis that a project manager with low relativism tends to discontinue a possibly failing project more than one with high relativism, showing that individual moral philosophy can partially mitigate the phenomenon of escalating managers’ commitment. (shrink)

A growing literature has focused on understanding how to detect and deter unethical consumer behavior. In this work, we focus on a particularly important type of unethical consumer behavior, consumer insurance fraud, and we analyze a unique dataset to understand how experts investigate suspicious claims. Two separate but related literatures inform the process of investigating suspicious insurance claims. The first literature is grounded in field research and emphasizes the importance of secondary sources. The second literature is grounded in laboratory studies (...) that emphasize the importance of interpersonal interactions. Here we draw upon both literatures to consider the importance of claimant interviews within the context of many investigative actions and the potential for claimants to avoid interviews. In an empirical study using qualitative and quantitative data from auto insurance claim investigations, we analyze investigative chronologies conducted by skilled experts. In doing so, we find that even when investigators can access information from a variety of sources such as witnesses, databases, and physical evidence, claimant interviews are the most important step in determining whether or not claims are denied or paid. Furthermore, we identify interpersonal avoidance as an important signal of unethical claimant behavior. Our findings inform deception detection theory and practice. We identify implications for deception detection in business, particularly for consumer unethical behavior and insurance fraud investigations. (shrink)

Vocational ethics and vocational moral socialization are important for the business ethical climate in a given country and in a given industry, but have not received attention in the literature. Our article suggests vocational ethics as a legitimate sub-specialty for business ethics research and development. The article addresses the exposure of vocational students to a combination of vocational school-based and workplace-based socialization, and outlines an agenda for teaching-oriented research and research-based teaching. More specifically, we first draft a conceptual frame of (...) reference and then report results and experiences from a scenario-based pilot study at one of the biggest vocational schools in the country. As a third step such a preliminary situation analysis inspires a number of suggestions for how one could start with developing this field, practically, empirically and theoretically. (shrink)

The paper takes a look at insurance customer dishonesty as a special case of consumer ethics, understood as a way of situation handling, as a moral choice between right and wrong, such as between self-interest vs. common-interest, in other words, a “moral temptation”. After briefly raising the question if different schools, of moral philosophy would conceptualize such moral temptations differently, the paper presents ‘moral psychology’ as a frame of reference, with a focus on cognitive moral development, moral attitude and moral (...) neutralization. Conceptualization questions can’t be answered finally without thinking at the same time of empirical research design and instrument design decisions, e.g. choosing between experiment vs. questionnaire studies, designing suitable moral temptation situations as an experiment vs. questionnaires with scenario vignettes. The paper discusses then experiences from a 2004 pilot survey, with a main focus on a few insurance dishonesty scenarios with follow-up questions. The paper has an open end, i.e. outlines desirable future theoretical, empirical and practical work with insurance customer dishonesty. (shrink)

To celebrate the 100th anniversary of Norwegian playwright Henrik Ibsen's death, during 2006 quite a number of cultural events were launched (cf. http://www.ibsen.net/). The article suggests celebrating Ibsen as a potentially useful resource for business ethics teaching. Departing from a short presentation of Ibsen's plays An enemy of the people and A doll's house the main focus of this paper is on two selected scenes from the latter piece -both as raw material for developing scenarios for moral maturity assessment (one (...) of them is strikingly similar to and different from Heinz' dilemma), and for teaching business students moral reflection and imagination. As an open end of the article a few wider questions are asked about the use of literature in addition to or instead of ethics when it comes to triggering moral reflection and imagination. (shrink)