Preliminary Investigations for Better Monitoring: Learning in Repeated Insurance Audits

2018 Risks  
Audit mechanisms frequently take place in the context of repeated relationships between auditor and auditee. This paper focuses attention on the insurance fraud problem in a setting where insurers repeatedly verify claims satisfied by service providers (e.g., affiliated car repairers or members of managed care networks). We highlight a learning bias that leads insurers to over-audit service providers at the beginning of their relationship. The paper builds a bridge between the literature on
more » ... e literature on optimal audit in insurance and the exploitation/exploration trade-off in multi-armed bandit problems.
doi:10.3390/risks6010015 fatcat:fmhrlcao6vcwbgc7xhezuqcxzq