Biological and Psychobehavioral Correlates of Credit Scores and Automobile Insurance Losses: Toward an Explication of Why Credit Scoring Works

The most important new development in the past two decades in the personal lines of insurance may well be the use of an individual's credit history as a classification and rating variable to predict losses. However, in spite of its obvious success as an underwriting tool, and the clear actuarial substantiation of a strong association between credit score and insured losses over multiple methods and multiple studies, the use of credit scoring is under attack because there is not an understanding of why there is an association. Through a detailed literature review concerning the biological, psychological, and behavioral attributes of risky automobile drivers and insured losses, and a similar review of the biological, psychological, and behavioral attributes of financial risk takers, we delineate that basic chemical and psychobehavioral characteristics (e.g., a sensation‐seeking personality type) are common to individuals exhibiting both higher insured automobile loss costs and poorer credit scores, and thus provide a connection which can be used to understand why credit scoring works. Credit scoring can give information distinct from standard actuarial variables concerning an individual's biopsychological makeup, which then yields useful underwriting information about how they will react in creating risk of insured automobile losses.     

The Causal Effects of the Minimum Wage Introduction in Germany – An Overview

In 2015, Germany introduced a statutory hourly minimum wage that was not only universally binding but also set at a relatively high level. We discuss the short‐run effects of this new minimum wage on a wide set of socioeconomic outcomes, such as employment and working hours, earnings and wage inequality, dependent and self‐employment, as well as reservation wages and satisfaction. We also discuss difficulties in the implementation of the minimum wage and the measurement of its effects related to non‐compliance and suitability of data sources. Two years after the minimum wage introduction, the following conclusions can be drawn: while hourly wages increased for low‐wage earners, some small negative employment effects are also identifiable. The effects on aspired goals, such as poverty and inequality reduction, have not materialised in the short run. Instead, a tendency to reduce working hours is found, which alleviates the desired positive impact on monthly income. Additionally, the level of non‐compliance was substantial in the short run, thus drawing attention to problems when implementing such a wide reaching policy.     

The influence of process accountability and accounting standard type on auditor usage of a status quo heuristic

There has been considerable discussion about the U.S. reporting standards becoming less rules based, similar to International Financial Reporting Standards (IFRS). One proposed advantage of a change to IFRS is increased comparability across multinational and non-U.S. companies. Additionally, some believe that IFRS afford greater flexibility in its principles, thereby enabling firms’ accounting choices to better reflect the true economic nature of any given transaction (FASB, 2002; SEC, 2003). With fewer rules, both financial statement preparers and auditors would be expected to adjust to having more options with regards to financial reporting. However, some proposed changes leave the option open to implement IFRS (or other principles-based standards) in ways that still follow rules in U.S. GAAP. This paper investigates whether prior year accounting treatments influence the judgment for current year treatments when one way to implement the standard is to follow the prior year treatment. We find that some auditors fixate on prior year scenarios and judgments, even if the current year scenario and applicable accounting standards are different. We find that holding auditors accountable for their decision making process reduces the likelihood of sticking with the prior year treatment most notably when the prior year standards were U.S. GAAP.     

Organising IMC roles and functions in the business‐to‐business network environment

As products and distribution channels become more homogenised, and competing on the basis of price more difficult, integrated marketing communications (IMC) has been identified as the ‘new frontier’ for effective differentiation. Research identifying roles and functions of IMC has primarily been focused on firms operating in the final consumer market. This research seeks to extend our understanding of the role and functions of IMC in business‐to‐business markets, with specific reference to an industry network. In order to achieve this, this paper explores the roles and functions (i.e. the associated organisation of IMC activities) adopted by the Tasmanian Light Shipbuilding Network (TLSN). In total, this research found evidence of three distinct roles (IMC Champion, Government Lobbyist, and Network Ambassador) that together served to implement the IMC functions of gathering, analysing and disseminating key marketing information throughout the network of firms. This research also presents an IMC framework that represents the manner in which the various network members coordinated the various IMC roles and functions.     

Consumer Socialization Agency: Implications for Family Decision-Making About Holidays

This paper investigates the influence young adult children living at home have over parents’ holiday decisions. “Consumer socialization agency” (CSA) was developed as a measure to capture the intercession or mediation one person accepts from another person about consumption issues. The analysis was conducted through a dyadic method, which involves collecting data from and analyzing data about pairs of people (dyads); in this case, parents and their children. CSA was related to family size and gender+ but more closely related to family communication style. Families fostering an open, issue-based communication style seem to have the highest likelihood of children socializing parents.     

Business Ethics Perspectives: Faculty Plagiarism and Fraud

Faculty plagiarism and fraud are widely documented occurrences but little analysis has been conducted. This article addresses the question of why faculty plagiarism and fraud occurs and suggests approaches on how to develop an environment where faculty misconduct is socially inappropriate. The authors review relevant literature, primarily in business ethics and student cheating, developing action steps that could be applied to higher education. Based upon research in these areas, the authors posit some actions that would be appropriate in higher education and suggest topics for continued study.     

The effects of managerial attitudes to design on company performance

Central to current thinking on what makes companies competitive is the notion that “it's not what you do, it's the way that you do it”. The way a task is carried out in a company is itself very much related to the attitudes and opinions of the company's managers. This article focuses on top managers’ attitudes to product design and shows which ones are related to superior competitive performance. An examination of the attitudes shows that there are seven basic managerial orientations to design. The most successful orientation is called the “balanced orientation” and consists of attitudes that underpin a commitment to leading the field technically and making developments market‐relevant.     

A 20-year evolution of internships: implications for retail interns,employers and educators

For decades, retail educators and companies have agreed that internships play a vital role in students' retail education. Overall, the perceived value of internships/internship programmes and the attitude towards them have remained fairly stable and positive. However, the role of internships, their structure and the way they are administered have changed. After reviewing relevant literature, we identified five dimensions as major trends/changes regarding internships or internship programmes over the past 20 years: 1) internships: the new recruiting tool; 2) increased endorsement of internships by retailers and educators; 3) paid vs. non-paid internships: a legal issue?; 4) structure of internship programmes revamped; and 5) socialization of interns: creating a bond. Each dimension is discussed in detail and practical implications for retail interns, employers and educators are presented.     

Assessing Consumer Fraud Risk in Insurance Claims

Abstract

We present an unsupervised learning method for classifying consumer insurance claims according to their suspiciousness of fraud versus nonfraud. The predictor variables contained within a claim file that are used in this analysis can be binary, ordinal categorical, or continuous variates. They are constructed such that the ordinal position of the response to the predictor variable bears a monotonic relationship with the fraud suspicion of the claim. Thus, although no individual variable is of itself assumed to be determinative of fraud, each of the individual variables gives a “hint” or indication as to the suspiciousness of fraud for the overall claim file. The presented method statistically concatenates the totality of these “hints” to make an overall assessment of the ranking of fraud risk for the claim files without using any a priori fraud-classified or -labeled subset of data. We first present a scoring method for the predictor variables that puts all the variables (whether binary “red flag indicators,” ordinal categorical variables with different categories of possible response values, or continuous variables) onto a common –1 to 1 scale for comparison and further use. This allows us to aggregate variables with disparate numbers of potential values. We next show how to concatenate the individual variables and obtain a measure of variable worth for fraud detection, and then how to obtain an overall holistic claim file suspicion value capable of being used to rank the claim files for determining which claims to pay and the order in which to investigate claims further for fraud. The proposed method provides three useful outputs not usually available with other unsupervised methods: (1) an ordinal measure of overall claim file fraud suspicion level, (2) a measure of the importance of each individual predictor variable in determining the overall suspicion levels of claims, and (3) a classification function capable of being applied to existing claims as well as new incoming claims. The overall claim file score is also available to be correlated with exogenous variables such as claimant demographics or highvolume physician or lawyer involvement. We illustrate that the incorporation of continuous variables in their continuous form helps classification and that the method has internal and external validity via empirical analysis of real data sets. A detailed application to automobile bodily injury fraud detection is presented.     

Board turnover in Taiwan’s public firms: An empirical study

Using a data set of 220 Taiwanese public firms with 2,200 observations over a ten-year period representing Taiwan’s economic takeoff period in the late 1990s, as well as six follow-up interviews conducted with top managers several years hence, this research examines the propensity of an important change variable for firms: the turnover of boards of directors. Specifically, it examines the relationship between board turnover and the organization’s environment, firm performance, and the largest shareholder’s control during a key period of economic transition and growth for Taiwan. The results show that substantial changes in board composition, though still not especially common in Taiwan, do occur, even in closely held companies. Turnover in the board is negatively related to the largest shareholder’s control power as well as firm performance. Board changes however, are not related to the environmental munificence and dynamism. These results are rather consistent with related research on firms in ethnic Chinese communities which suggests that top management and board turnover while not common, does sometimes occur, and more recent institutional and industrial change in Taiwan is likely encouraging further governance reform. This has implications for important facets of firm governance and change, as well as expanding our knowledge about firms domiciled in an ethnic Chinese community, particularly during times of economic transition and growth. Follow-up interviews with four top managers from our sample, along with one consultant and one government official in Taiwan provided additional confirmation and clarification of our results.