Moral intensity, moral awareness and ethical predispositions: The case of insurance fraud

Abstract

The issue of insurance fraud by consumers continues to perplex insurance firms, costing billions of dollars per year in the United States alone. Some analysts report that 10 per cent or more of property/casualty insurance claims are fraudulent, while less than 20 per cent of fraudulent claims being detected. Consumer attitudes are becoming more tolerant of insurance fraud in recent years. Recognizing that not all insurance fraud situations are created equal, we investigate variability in perceptions of moral intensity in dissimilar insurance padding situations in a 2 (to help others versus to profit self) × 2 (a small credit union versus a large online insurer) model and compared the results between two independent samples (college students/Millennials and an older adult population). We also investigated the impact of ethical predispositions (formalism and utilitarianism) on moral awareness and moral judgment using these four scenarios. The results suggest that the Millennials may exhibit more situationalism and more lenient judgments of collaborative versus unilateral ethical violations. In particular, ‘for self’ versus ‘for others’ comparisons show striking differences between the two age groups. The results add to the growing literature in explaining intra-personal variability in moral decision making.

Appendices

Appendix A

Scenario descriptions and samples

Scenario 1: Small, local insurer, $750 fraud amount (padding) to cover the friend’s loss.

Scenario 2: Small, local insurer, $750 fraud amount (padding) to cover the deductible required.

Scenario 3: Large, online insurer, $750 fraud amount (padding) to cover the friend’s loss.

Scenario 4: Large, online insurer, $750 fraud amount (padding) to cover the deductible required.

Scenario 1 for the Millennials

Mickey is a college student just like you. Mickey is renting an apartment, and he has renter’s insurance that provides protection if his personal property is damaged, stolen or destroyed. He purchased the insurance from a personal agent at a small, local credit union with about 1000 members.

One day, his upstairs neighbors have a kitchen fire, and the water used to put out the fire by the fire department ruins everything in an apartment he shares with a close friend. Unfortunately, his friend’s computer is ruined by the water, and he does not have the money to buy a new computer mid-semester. The roommate does not have renter’s insurance to cover the loss of the computer. The roommate asks Mickey to submit a claim for his computer along with Mickey’s claim. Mickey knows that this goes against the insurance contract, and understands that fabricating damage claims can subsequently raise cost of insurance premiums for other credit union members.

Mickey goes ahead and submits the claim for the roommate’s computer (value estimated at $750).

Scenario 1 for the adults

Mickey is a homeowner, and his homeowner’s insurance is provided by a small, local credit union with about 1000 members.

One day, a strong storm blew the shingles off of Mickey’s house. His friend was visiting at the time and his car was parked in the driveway. His car’s windshield was cracked, though not from the storm. His friend had recently lost his job and he was unable to afford the repair cost. His friend asks Mickey to submit a claim for his car windshield along with Mickey’s claim. Mickey knows that this goes against the insurance contract, and understands that fabricating damage claims can subsequently raise cost of insurance premiums for other credit union members.

Mickey goes ahead and submits the claim for his friend’s windshield (value estimated at $750).

Appendix B

Table B1

Table B1 Measurements