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Wiley InterScience | ||||||||||||||
  Journal of Risk and InsuranceVolume 72 Issue 4, Pages 551 - 575 Published Online: 30 Nov 2005 © 2010 The American Risk and Insurance Association. Published on behalf of the American Risk and Insurance Association
Abstract | References | Full Text: HTML, PDF (Size: 1211K) | Related Articles | Citation Tracking 
Deterring Fraud: The Role of General Damage Awards in Automobile Insurance Settlements
Financial support for this research was provided by RAND's Institute for Civil Justice (ICJ). The research herein does not necessarily reflect the opinions or policies of the ICJ or its sponsors. Special thanks to Keith Crocker, Sharon Tennyson, Stephen Carroll, Robert Reville, Seth Seabury, Richard Derrig, Herbert Weisberg, members of ICJ's Insurance Advisory Council, and participants in the 2003 Risk Theory Society Seminar for helpful comments on earlier drafts of this article. This article has also benefited from the comments of two anonymous referees. Copyright The Journal of Risk and Insurance ABSTRACTAwards for pain and suffering and other noneconomic losses account for over half of all damages awarded under third-party auto insurance bodily injury settlements. This article hypothesizes that third-party insurers use general damage awards to reduce the incentive to submit exaggerated claims for specific damages for injuries and lost wages. Consistent with this hypothesis, the article finds evidence using data on over 17,000 closed bodily injury claims that special damage claims that exceed their expected value receive proportionally lower general damage awards than claims that do not. Among the implications of this research is the possibility that insurers will be less zealous in challenging fraudulent special damage claims under a third-party insurance regime than they will be under a first-party insurance regime in which access to general damages is limited. | 
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