Premium Fraud – Why Fight It?

By Grace Nicholas, Premium Fraud Unit Supervisor

By Grace Nicholas, Premium Fraud Unit Supervisor

Before I get too far into my first post as a member of the Texas Mutual blogging team, I need to clear something up. It’s the elephant in the room that insurance carriers and their policyholders too often shy away from discussing: Anyone who has a stake in the workers’ compensation system can commit fraud. Unfortunately, that includes employers.

Now that we’ve got that out of the way, here’s the good news. I’m new to blogging, but I’m a veteran in the fight against workers’ comp fraud. In my experience, the majority of employers, like the majority of claimants, are honest. A rare few, however, cheat the system. In the process, they take money out of their honest competitors’ pockets. Here’s a hypothetical situation for context.

After a lifetime of working for someone else, you take a chance and launch a business. Start-up costs, coupled with the struggle to build a customer  base, make those first years stressful. Still, you love what you do, and you’re committed to making it work.

Now let’s assume you’re bidding competitively on jobs, but you consistently lose to the same company. Strange, because it’s a start-up like yours. How does the owner keep getting the better of you? What does he know that you don’t? Is he a better salesman? Is he better at managing his costs? Maybe. Or maybe he’s cheating on his workers’ compensation premiums.

With the money he’s saving, your competitor underbids you on hard-earned, much-needed business. At this rate, it’s entirely possible he will eventually put you out of business.

A single employer can cheat their insurance carrier – and you – out of hundreds of thousands of dollars by under-reporting or hiding payroll and engaging in other fraud scams.

Insurance carriers have an obligation to protect their policyholders’ premium dollars. I hope your carrier of choice takes a proactive approach, investigating every report of suspected fraud by employers, claimants and health care providers. In a future post, I’ll give you some tips for helping your carrier identify and stop premium fraud.

About the author
Grace Nicholas is a certified fraud examiner and the premium fraud unit supervisor at Texas Mutual Insurance Company. In her 20 years with Texas Mutual, Grace has testified in numerous depositions and trials.  She has also shared her workers’ compensation fraud expertise as a speaker at numerous industry events. Prior to joining Texas Mutual in 1993, Grace worked for the Texas Department of Insurance as a financial examiner, reinsurance examiner and fraud investigator. Grace earned her BBA in Accounting from Texas State University.

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