$40B Annually In Insurance Fraud – Part II
Last week we talked about insurance fraud and how the amount of money estimated is $40B annually. That is mind-blowing.
How does this happen? One of the ways it happens is the misclassification of employees.
When a worker is in a high- risk position, like a roofer, the insurance premiums can be through the roof and so an employer might consider or do, in this case, classify them as a lower risk employee, like that of an administrative clerk.
This misclassification results in significantly lower premiums.
The insurance agent or broker usually must rely on what the policy holder discloses. It is usually only once a claim has been filed that a claims adjuster may catch the discrepancy. For example, a drywall construction worker maybe on a roof and if he/she falls off the roof, the claims adjuster would definitely see the discrepancy if this employee was classified as an administrative clerk. Most administrative clerks, okay none, are doing drywall on the roof for their regular tasks required of their job.
Dr. Rick Palmer, DBA, MBA, APA, Audit Specialist, Afirm, a premier provider of premium audits, inspections and risk solutions says, “Business owners may also present employees as subcontractors or independent contractors rather than actual employees.
This is common that workers are misclassified. So what makes up an independent contractor vs. an employee? The IRS has a page on their website that outlines the difference here.
It comes down to a matter of integrity. Business owners who have people working for them either have employees or contractors. According to OSHA, there is a SSIC code list by which all employees need to be properly classified within their job description or category. You can learn more here: https://classcodes.com/sic-code-list/.
If you run a risky business, you can expect to pay for for insurance premiums as part of your cost of doing business. In my opinion, higher priced premiums and proper coverage is much better than jail anyday!
Have a great day!
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