Jul 27, 2012 2 min read

Might egocentrism affect judgements about insurance fraud?

How  outrageous a suggestion, you might ask.  Yet just such a question (at least in the general business sense) is explored in an interesting book called ‘Blind Spots’, written by Max Bazerman and Ann Tenbrunsel . Their book explores our apparent failure to do what’s right in ethical situations, from the perspective of behavioural ethics. In one of its chapters, it considers why, in the midst of a disagreement, we often fail to see eye to eye on a matter. The reason put forward is that different people are paying attention to different parts of the argument.

So, for example, when asked about the extent to which we contribute to household tasks, we tend to overestimate what we perceive to be our contribution, while our partner has a similar tendency and overestimates their contribution. The result is a combined effort greater than 100%, which means either a super clean household, or more likely, a tendency to identify with those things that are most familiar – one’s own.

It appears that our minds absorb the information that is advantageous to us and downplay the information that isn’t. What’s more, it’s something that we all have a tendency towards. It’s part of human nature to make self-serving judgements regarding allocation of resources, or responsibility for something having happened. For example, I want to carry on fishing, but I’m concerned about stock levels. Or I’m the one who acted ethically, even though the firm I help run ended up doing the wrong thing.

This tendency towards egocentrism will lead different people to reach different conclusions when considering a fair solution to a problem. But surely, if we are all doing it, doesn’t it then all even out in the end? Not necessarily.

The problem lies with the allocation of influence. If two sides don’t see eye to eye on something, then more often than not, it is the one with the most influence (or power, call it what you may) whose views tend to prevail.

Up until the mid seventeenth century, the UK’s legal system suffered from just such distortions and in the decades following the end of the Commonwealth, a series of measures were introduced to counteract them. This allowed cases such as those involving accusations of fraud to be judged in a more neutral fashion.

Are the lessons there for the insurance sector to take note of? I think there are. In earlier posts, I’ve outlined a number of concerns about how the insurance sector investigates potentially fraudulent claims and the repercussions for those claimants subsequently put on the Insurance Fraud Register. The lack of a universal definition for ‘proven’ and ‘fraud’ were of particular concern. The danger for insurance is that insurers will sit in judgement over those it suspects of fraud and be unaware of their own innate tendency to favour their particular version of events. That may have been possible in the context of everyday insurance claims, but could be far from acceptable within the context of accusations of fraud and the blacklisting that will be associated with it.

And before anyone asks, yes, I am probably as egocentric as anyone else, including the many hard working insurance fraud investigators.

Here is the reference to the book mentioned:

‘Blind Spots’ by Max Bazerman and Ann Tenbrunsel, published in 2011 by Princeton University Press.

And for a good overview of political, social and legal developments in seventeenth century England, I would recommend Christopher Hill’s ‘The Century of Revolution‘, published in 2001 by Routledge Classics.

Duncan Minty
Duncan Minty
Duncan has been researching and writing about ethics in insurance for over 20 years. As a Chartered Insurance Practitioner, he combines market knowledge with a strong and independent radar on ethics.
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