Insurance fraud is a serious problem throughout the world. In response to this, Dionne and Gagné (2002) have pioneered an approach that provides evidence of opportunistic fraud that can be distinguished from adverse selection and moral hazard. This paper follows their methodology and provides further evidence of opportunistic fraud existing in the cases of both contracts with replacement cost endorsement and "no deductible" contracts. Under a replacement cost endorsement contract, the incentive to engage in opportunistic fraud becomes stronger near the end of the policy year, whereas under the no deductible contract it is stronger at the beginning of the policy year. This paper also contributes to the literature in that it is the first paper to investigate the relationship between opportunistic fraud and the macroeconomy. We find that the severity of opportunistic fraud fluctuates in the opposite direction to the business cycle. The opportunistic fraud is stimulated in times of recession, and it is mitigated during a boom.
