The effectiveness of forensic auditors in the insurance process

Abstract

Purpose: With this study, the authors aim to design a measure to determine the effectiveness of having Forensic Auditors in the Insurance Business. Moreover, in doing this to determine whether this measure is affected by different demographic variables. Design/Methodology: To prove the effectiveness of forensic auditors in the insurance industry, the authors designed a questionnaire using criteria of effectiveness established by Bond et al. (2011) which was completed by 402 valid participants. The criteria revolved around having procedural, substantive, transactive and normative effectiveness. Findings: Results show that engaging forensic auditors in the insurance industry are effective. Forensic auditors are needed in the claims process of insurance firms, and possibly, they should further be engaged in the risk management team of an insurance company. However, with regards to determining the compensation amount, respondents showed a lack of trust, and prefer if forensic auditors work together with loss adjusters, lawyers, and actuaries to enhance their service. Practical Implications: With the engagement of forensic auditors, there would be added benefits to society. Although insurance firms may not eventually benefit in lower claims costs, they would benefit in the way they decide to reserve. Society would also benefit from such engagement, for instance, from enhanced knowledge of fraud detection thereby affecting the behaviour of society towards insurance business, which would ultimately reduce opportunities and capabilities of fraudsters.