This paper examines whether the policyholders who properly maintain their vehicles will have less chance of committing opportunistic fraud. Using data from Taiwan, we first confirm that the replacement cost endorsement will induce opportunistic fraud. Moreover, we find that the pattern of opportunistic fraud disappears for the group of policyholders with proper maintenance records, whereas the pattern of opportunistic fraud remains for the group of policyholders without proper maintenance records. Our results are robust to the definition of proper maintenance. The potential explanations are also discussed.
Conference of American Risk and Insurance Association