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Workers' Compensation Premium Fraud

Workers' compensation insurance premium fraud is committed when an employer lies to purchase a workers' compensation policy, with the intention of paying less than the appropriate premium.

By David M. Bogan | Updated on November 25, 2008

Workers’ compensation insurance premium fraud is committed when an employer lies to purchase a workers’ compensation policy, with the intention of paying less than the appropriate premium. In the past, our industry has certainly placed premium fraud low on the priority list, if not turned a blind eye to it altogether. This is because of the sentiment that it is better to receive part of what is owed than none at all.

However, most states have adopted Special Investigation Unit and Fraud code that requires insurers and self-insureds alike to — among other things — investigate and pursue prosecution of insurance fraud or face heavy fines. We have also come to acknowledge that the cost of claims related to under-reported payroll policies far outweighs what is collected in the partial premium due. Further, recent studies have demonstrated that tremendous amounts of unreported and under-reported payroll have affected workers’ compensation insurance premiums in a significant way for those who do adhere to the rules.

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