Program Profile: Deterrent-Letter Project (Quebec, Canada)

A deterrence-based intervention that took place in four Quebec insurance companies aimed to deter residential theft insurance claimants from exaggerating the value of their claims. The program is rated Promising. The project resulted in a statistically significant reduction in claim padding compared to the control group.

A Promising rating implies that implementing the program may result in the intended outcome(s).

This program's rating is based on evidence that includes at least one high-quality randomized controlled trial.

Program Goals/Program Components

The Deterrent-Letter Project is a deterrence-based intervention that took place in four Quebec (Canada) insurance companies. The program sought to deter insurance claimants from exaggerating the value of their residential theft claims through the threat of legal sanctions. To do so, the deterrent letters sent to claimants had three purposes: 1) inform the claimant that the insurance company does not condone claim padding and will prosecute all claimants who have exaggerated their claims, 2) serve as a reminder of the sanctions that result from claim padding, 3) encourage social conformity, by indicating that society considers exaggerated claims to be dishonest.

The deterrent letters were either hand delivered or mailed. Further, to ensure that the claimants read the letter, a summary of the letter, which mentioned that claim padding was a crime according to the Canadian Criminal Code, was included on the claim that the claimant had to sign. Claimants were made aware that, for their claims to be processed, the forms had to be signed.

Program Theory

The Deterrent-Letter Project was based on the deterrence theory, specifically situational deterrence, which holds that criminal sanctions can have a specific effect of reducing recidivism, or a general discouraging effect on those who may be tempted to commit a crime (Blais and Bacher 2007). It is believed that white collar criminals, the target of this program, are more receptive to punishment and sanctions, as they are thought to have more to lose than other criminals in terms of financial status. Further, situational deterrence concentrates on the person’s fear that results from the actual circumstances of the event (i.e., the threat of criminal sanctions and other risks associated with commission of the crime). The theory holds that a persons will refrain from committing a crime if he or she perceives a high risk of getting caught.

Overall, the deterrent-letter project used the situational deterrence theory as its framework because economic crimes are seen as a rational form of criminality, where the individual weighs the costs and benefits; therefore, the threat of legal sanctions instills fear in the highly calculating potential individual, with the intent of preventing the criminal act.

Study

To examine the impact of the Deterrent-Letter Project on claim padding, Blais and Bacher (2007) conducted a randomized control trial at four insurance companies in Quebec, Canada. Each company followed the same protocol. Claims were randomly assigned to the treatment or the control group during the 6-month prevention program. Cases in the treatment group received the written threat, which was either hand delivered or mailed, depending on the type of adjuster assigned to the claim (external adjusters hand-delivered letters, while internal adjusters mailed the letters). Cases in the control group were managed as usual. The only stimulus presented differently as a part of the program was the deterrent letter; no other practices in the insurance companies were modified.

The study included data on 765 claims. The average age of claimants was 42.9 years, and 58 percent were men. The mean coverage of claimants was $58,100. Approximately 25 percent of claimants were insured for no more than $25,000, whereas 20 percent were insured for no more than $100,000. Approximately 88 percent of claimants owned or co-owned their home, while the remainder rented. Approximately 7 percent of claimants were unemployed, and 4 percent were students. Claims amounts varied from $85 to $82,314, with the mean claim $3,105.50. Claim padding was measured by the claim: value ratio, which is known as the ratio of the claimed amount to the actual value of the insurable goods.

Collaboration with the Insurance Bureau of Canada allowed for the randomized field experiment of the Deterrent-Letter Project to take place in four insurance companies in Quebec, Canada. The loss adjusters in each of the four companies were provided with training regarding the conduct of the experiment (i.e., cases in the experimental group received the deterrent letter, while cases in the control group were managed as usual).

These sources were used in the development of the program profile: