Not Getting the Whole Story?
Premium Fraud and Payroll Misclassification
We’ve all seen the headlines of big fraud cases, where employers intentionally underreport their payrolls to lower their workers’ compensation premiums. The reality is that payroll misclassification – receiving inaccurate payroll figures from your customers – happens for many reasons. It’s a spectrum from outright fraud to inadvertent error. Either way, it costs the insurance industry billions.
A $22 billion error
It’s a conservative estimate that $22 billion in payroll is misclassified each year, costing the insurance industry $1.6 billion in workers’ compensation premiums.
We recently published the latest trends sizing up this problem for the industry by industry and state.
Where do I start?
Many insurers do not have a great process to find policies that are ripe for payroll error, and no one can afford to physically audit every policyholder. There are solid steps you can take to begin tackling the misclassification problem, and we can help walk you through it.
- Create a baseline view
- Define success criteria
- Analyze your audit effectiveness
- Measure before and after results
Flag problem accounts
When you leverage advanced analytics, you can rank order your policies by performance and flag those accounts which should be audited for payroll misclassification.
A regional carrier did just that, and saved more than $1M and improved loss ratio by 3.1%.