From Compliance to Culture: Organizational Communication as a Tool to Foster Effective Fraud Risk Management in Insurance Industry

Abstract

Fraud continues to pose a systemic challenge to the insurance industry, undermining regulatory compliance, consumer trust, and financial stability. Traditional explanations of fraud have relied on psychological frameworks such as the Fraud Triangle, Diamond, and Pentagon, which identify pressures, opportunities, rationalization, capability, and arrogance as central drivers of misconduct. Yet limited attention has been given to how organizational communication can intervene in these dynamics and operationalize legal and regulatory requirements within Enterprise Risk Management (ERM). This article presents findings from a longitudinal case study (2014–2024) of a leading Indian insurance company. Drawing on archival documents, internal communication records, and semi-structured interviews, the study traces how communication practices evolved across three phases of fraud risk management. In the compliance phase, communication served primarily as a legal tool to satisfy regulatory mandates, but it did little to reduce underlying opportunities or rationalizations. In the process phase, middle managers acted as sensegivers, reframing fraud detection through narratives, visualizations, and financial performance metrics, thereby linking regulatory compliance to operational value and enhancing organizational capability. In the transformation phase, communication shifted toward participatory dialogue and co-created digital tools, addressing arrogance and competence concerns and embedding fraud prevention into organizational identity. The findings demonstrate that communication functions as more than a compliance mechanism: it operates as a psychological and cultural bridge that translates abstract legal mandates into shared organizational practices. By linking communication strategies with established fraud theories, the study offers insights for regulators, insurers, and policymakers on how fraud risk management can be strengthened. It argues that effective communication not only supports regulatory alignment but also fosters a resilient risk culture, thereby reinforcing the legal and institutional integrity of the insurance sector.