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Workers' comp premium fraud claims many victims

Workers' comp fraud is more than an employee filing a leg injury claim, then running a marathon. It's a different type of scam -- premium fraud -- that can have the highest total societal cost.

By Phil Galewicz | Updated on October 06, 2009
When most people think of workers’ compensation fraud, they envision an employee filing a claim for a leg injury only to be caught running a marathon a few weeks later. But it is a different type of scam — premium fraud — that can have the highest total societal cost.

Workers’ compensation premium fraud occurs when an employer falsifies an employee’s classification, understates the size of payroll, or attempts to evade coverage requirements.

It may seem like a victimless crime because the employer usually still pays for some workers’ compensation coverage, just not his full and fair share. But that underpayment robs the state of valid tax revenue and prevents insurers from having enough premium money to cover claims. An even bigger impact is on companies who are fully paying their premiums. Because these companies are paying a higher amount for coverage than their unscrupulous competitors, they often lose out in bidding for new business because their bids have to cover their higher insurance costs.

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