A new Dutch study suggests that fraudulent behavior often occurs when an individual is unhappy about being rejected in a business environment.
Fraud is deliberate deception to secure unfair or unlawful gain. The false representation of a matter of fact is often done by individuals who are not professional criminals.
In the new study, researchers discovered we are more likely to submit false insurance claims if our original submissions are rejected. Regardless of whether that rejection is fair or unfair, or if there is a financial reward at stake, being rejected makes us feel unhappy and we react by behaving dishonestly.
For the study, researchers used a mock insurance claim scenario and found that people whose claims were initially rejected were quick to fudge their stories to get their claims settled.
Whilst the odd small claim inflation in the real world may seem harmless enough to the perpetrator, insurance fraud is a very expensive crime. According to the FBI, insurance fraud amounts to around $40 billion per year, or $400-$700 per family per year in the U.S.
This finding is salient given the escalation of health care costs and federal deficits.
“Fraud is a widespread issue that is costing society and thereby each individual large sums of money. The problem with fraud is that it benefits a few people, but as a result harms the rest of a population,” said researcher Dr. Sophie Van Der Zee.
Understanding what drives people to falsify information on their insurance claims could mean huge savings to both the insurance firm and the consumer.
The scientists responsible for this research think they have the answer: clarity and transparency on the part of the insurer. Make the guidelines clear, and make the rejection policy clearer again.
The study looked at the rejection of a person’s efforts, and how it affected their emotions and subsequent behavior.
To do this, researchers used an online platform that allowed participants to fill out and submit mock insurance claims. The format also allowed the participants to report their levels of happiness, sadness, frustration, anxiety, and guilt. The claims were either accepted or rejected by the researchers.
People whose claims were rejected reported more negative emotions. They were also significantly more likely to cheat or lie in the next phase of the study, regardless of whether the rejection was made on objective or subjective grounds, or whether or not there was a financial incentive.
Interestingly, the emotional insult from having a claim rejected was the issue as it did not matter if the rejection was fair or not, or if they stood to gain financially.
According to Van Der Zee this means that tackling fraud will positively affect a lot of (honest) people’s lives.
“If we understand when people tend to behave dishonestly and commit fraud, we can construct the environment in a way that people are encouraged to behave honestly rather than deceptively.”