What is Premium Insurance Fraud?

California law requires that all employers maintain workers' compensation insurance for their employees. Premium insurance fraud is committed when an employer intentionally misrepresents to the State or insurance company the number of employees, nature of work performed by certain employees, amount of payroll, or the loss history.  These illegal misrepresentations allow deceitful employers to purchase insurance at a significantly lower rate, or to avoid purchasing the insurance at all.  This practice also places their competitors at a disadvantage because it forces them to compete against a company with lower operating costs.

This deceptive under or non-reporting drives up the cost of insurance premiums for legitimate businesses, which pay higher rates for their workers' compensation insurance.  These legitimate businesses are less competitive against crooked companies who are able to under-bid their competitors due to lower business costs resulting from insurance fraud.  This also endangers injured employees who may be denied the workers' compensation benefits intended to meet their physical, psychological, and financial needs for a work-related injury.