Workers’ compensation insurance premium fraud has become a real problem in Florida.

Besides being illegal, it affects the bottom lines of all businesses, large or small, and leads to higher insurance premiums for honest businesses. Additionally, it has a negative impact on the state’s rate-making system.

 There are three common types of premium fraud – underreported payroll, misclassification of employees, and experience-modification evasion.

The most common form of fraud of this type is underreporting of payroll, which occurs when the business or policyholder does not accurately report the entire staff’s payroll to the insurance carrier. Examples include paying employees “under the table” or classifying employees as sub-contractors or independent contractors when they are actual employees..

 The second form of payroll fraud is misclassification of employees. A good example of this is when a business owner intentionally lists a handyman as a clerical employee in an attempt to pay less for the workers’ compensation premium.

 The third form of fraud is experience-modification evasion. When a business with bad claims, or “experience,” closes and attempts to re-emerge as a new business on paper in order to obtain a lower experience-modification factor, the business or policyholder is committing fraud. In reality,, the business did not change in any way other than the new name.

 We in the healthcare world have noticed the state of Florida is hiring many more fraud investigators and targeting medical practices that are not carrying workers’ compensation coverage when required. The law is clear: any non-construction employer must provide this insurance when they have four or more employees, regardless of full-time or part-time status.

 If you have additional questions or would like more information about this issue, please contact your agent or feel free to call Tom Murphy at 800-966-2120.

 Tom Murphy is a workers’ compensation and medical malpractice insurance specialist agent with Danna-Gracey. He can be reached at or (800) 966-2120 or Murphy@dannagracey.com.