Rising premiums are among one of the highest costs for today’s small business owners, but why is that? The answer is simple; false claims made against businesses can really drive up the cost of premiums that owners pay. So what can one do to protect themselves and their business?

Lt Col Jeff Mayne
BBC World Service via Compfight

Stay informed! Nothing will help a business owner more than having the general knowledge of the types of fraud that are most commonly filed against them. So what are the most common ways people try to scam insurance companies and their employers?

Worker’s Compensation

Worker’s compensation fraud happens when a worker files a claim that they were injured on the job when they weren’t, or aren’t even injured at all. Additionally, it can also take place when a worker claims to be more injured than they really are or stays out of work longer than necessary.

What can a business owner do to prevent these false claims? While not everything is in the business owner’s control when it comes to this type of dishonest thievery, there are some steps one can take to lessen the likelihood of worker’s compensation abuse.

Inform your employees about how it can affect the company and in turn affect them. Try to avoid coming off as threatening and approach them in an informative manner. It is also a must that a business owner creates a safe working environment. After all, a safer work place should lead to fewer accidents. Furthermore, let the workers know that the company is willing to work with them and their doctors to ensure a quick recovery. Last but not least, be careful when hiring. As a business owner always perform background checks and verify references.

Liability Insurance

The most common form of liability insurance fraud is known as the slip and fall scam. For those unaware of this scam, it happens when someone visits a business and stages a fall that they claim is due to a spill or an object that should not be on the floor. The scammer then claims the business is at fault for not keeping a clean sales floor. What can a business owner do to prevent this?

Set up surveillance in your store. If the fall can be caught on video it is more likely that it can be determined to be a legitimate accident or a scam. It is an easy solution to a common scam. The initial costs of adding surveillance equipment to a business will be lower than falling prey to a fraudulent law suit and will reduce monthly insurance premiums (it may also have the added benefit of discouraging shoplifting).


Premium fraud is far too common in the business world. Unlike the other types mentioned above, this is done by the business owner, not an employee. If a business owner is not reporting facts correctly and being honest why would the employees be expected to do the same? Set a great example for all employees in the company, be honest. This can be done by ensuring that the number of employees is reported correctly to the insurance company. Every worker needs to be on the books, nothing under the table. Furthermore, do not list high risk employees as low risk employees. If an employee works in a warehouse where they are more at risk to be injured, do not try to pretend that that employee is a low risk office worker. Honest companies attract honest employees.

Insurance fraud will lead to higher premiums, not only for the business where the crime takes place but other businesses in the insurance pool. For this reason it is in the best interest of all business owners to be aware of the many ways others try to take advantage of the system. Only through awareness and diligent observation can business owners cut down on false claims. The less frequent insurance fraud is committed the more likely insurance premiums are to stay low.

If someone is aware of insurance fraud they should report it immediately to their state’s insurance department. Through honest hard work we can all help to keep the cost of insurance down!

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