Chapter 6Warranty Fraud

Warranty fraud affects warranty costs. Controlling this cost requires a proper understanding of the nature of warranty fraud. This chapter deals with this topic. The outline of the chapter is as follows. We start with an introduction to fraud in general and continue with discussion on warranty fraud. The subsequent sections deal with actors (fraudsters) and victims of warranty fraud, classification of warranty fraud, warranty fraud patterns, and consequences and impacts of warranty fraud. The last sections deal with the actor being (i) customer, (ii) service agent, (iii) sales channel, (iv) warranty administrator, and (v) warranty provider, respectively. In each section, we discuss the motivation and the methods/techniques used by actors and the impacts of the warranty fraud on one or more victims.


Oxford Dictionary (2015) defines fraud as “Wrongful or criminal deception intended to result in financial or personal gain.” So it is intentional trickery, to get dishonest financial or other advantage over others.

If there are significant financial benefits to be gained and limited risk of getting caught, there are some people and companies who try to take advantage of the opportunity, resulting in fraud. This can occur in the context of individuals and companies. Figure 6.1 shows the key factors that are important in the context of fraud. Naturally, most people and companies have higher integrity and won't take advantage of the opportunity. ...

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