Workers' Compensation Insurance Premium Fraud and Its Impact on Policyholders
Recent headlines underscore the consequences of committing workers’ compensation insurance premium fraud:
- Roofing firm owner pleads guilty in fraud scheme
- Business owner sentenced to jail for workers' comp insurance fraud
- Trucking company owners cheated workers' comp carrier out of millions
All are real examples of workers' compensation insurance policyholders in the U.S. who were caught committing insurance premium fraud. And it is just the tip of the iceberg. The annual cost of workers' compensation insurance premium fraud in the U.S. is $25 billion, according to a July 2022 Coalition Against Insurance Fraud study.
Most workers' compensation policyholders truthfully report the number of workers, their job classifications, and payroll information to their insurers to accurately price their workers' compensation policy premium.
However, some employers intentionally misrepresent the company's payroll and job classifications to reduce their insurance premiums, giving them an unfair advantage over law-abiding employers.
It can be tempting, but it's illegal, and it can result in higher premiums for honest policyholders.
Most insurance companies have a Special Investigations Unit (SIU) dedicated to detecting and preventing insurance premium fraud and fraudulent claims payments. NJM’s SIU has experienced investigators and analysts who leverage technology, data analytics, and predictive models to identify and investigate fraudulent activity to protect NJM’s policyholders.
"Insurance companies are committed to ensuring a level playing field for their policyholders with premiums that reflect the legitimate risks of their industry and line of work,” said Pat Conaway, SIU Manager for NJM Insurance Group, who has more than two decades of experience investigating insurance fraud.
Conaway suggests employers contact their insurance company with employee job classifications or payroll changes and work cooperatively with their insurers during an audit.
If you suspect insurance fraud of any kind, you can report it to your insurer or the National Insurance Crime Bureau.
Sources:
JIFA: The Costly Crime and Impact of Workers' Comp Premium Fraud - InsuranceFraud.org
How Workers' Compensation Fraud Games the System | National Insurance Crime Bureau (nicb.org)
$308.6 billion: The real annual cost of insurance fraud in the U.S. | PropertyCasualty360
