$40B Annually In Insurance Fraud – Part I

 In Business Insurance, business tips, CO Insurance, Commercial Insurance, Davis Insurance, Davis Insurance Agency, Insurance, Insurance Wheat Ridge, Wheat Ridge, Wheat Ridge Insurance

The Federal Bureau of Investigation (FBI) estimates in excess of $40B in Insurance Fraud annually. Premium fraud, willful misrepresentation of information with the intent to pay less than the appropriate premium for an insurance policy or coverage, is at the top of the list.

“There are always companies and individuals trying to manipulate the system to save money on insurance,” said Dr. Rick Palmer, DBA, MBA, APA, Audit Specialist, Afirm, a premier provider of premium audits, inspections and risk solutions. “Fraud is committed with the intention of saving premium and can take several different forms.”

Underreporting payroll and sales figures.

“Clients may inaccurately report their work staff to the insurance company, often by paying employees off the books,” said Dr. Palmer.

“Clients may inaccurately report their work staff to the insurance company, often by paying employees off the books,” said Dr. Palmer.

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In Northern California, a 34-year-old janitorial and pest control company owner was sentenced for eight felony counts relating to workers’ compensation insurance premium fraud; she was required to pay more than $2 million in restitution to insurers. It was determined that the number of employees and its payroll were misrepresented during the application and renewal process for workers’ compensation insurance.

“In trucking, owner/operators are paid based on the amount of miles and weight of the load. Payroll can be manipulated by reporting lower miles and lighter loads,” said Dr. Palmer. “Auditors cannot always catch that immediately, but it usually comes out in quarterly tax reports.”

Dr. Palmer adds that, “Payroll may be hidden in several different business entities, or shell companies, that do the same type of work, where one company will pay the other company, and report lower payroll.”

One Florida construction business owner recently used 12 shell companies to move $70 million in undeclared payroll in a workers’ compensation scheme.

It is important to report your payroll and sales figures correctly to your insurance broker to keep yourself safe as a business owner.

Have a great day!

 

Bob

The Davis Insurance Agency (an Affordable American Insurance company) in Wheat Ridge, CO offers auto, car, home, house, fire, workmen’s compensation, antique car, classic car, commercial, business, life, motorcycle, renters, ATV and RV insurance. Call us today for a free quote at (303) 233-1535

 

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