There’s a good bit of Workers’ Compensation fraud being committed by subcontractors in the form of handing out fabricated certificates of insurance. Also, insurance agents commit fraud from time to time when they collect a premium from their client but intentionally fail to make the placement with an insurance carrier and pocket the money. In addition, untrained staff in an insurance agency can negligently fail to make a carrier placement after collecting premium payments. And finally, some insurance agents may place Workers’ Compensation for their clients with insurance providers that are not true Worker’s Compensation carriers or that are not approved by the state department of insurance or Worker’s Compensation commission.
You can protect yourself against fraud and other mistakes and problems by carefully reviewing the certificates of insurance that you collect and by being aware of “red flags”.
The first “red flag” is that the insurance agency name should not be shown in place of an insurance carrier under the section “Insurers Affording Coverage”.
The second “red flag” is if the insurance carrier names are unfamiliar. You can always check out the carrier names by giving us a call, by going to www.ambest.com, or by calling the state department of insurance.
The third “red flag” is when the insurance carrier name includes the terms “employee leasing” or “PEO”. Many of these companies are legitimate providers of Work Comp but some have been bogus. Once again, give us a call if these names appear and we can check them out.
Next, make sure that the COI is signed by an insurance agent. If its not signed, don’t accept it as valid.
Next, make sure that the font style and type size are consistent. If they aren’t, that is a sign that the certificate may have been doctored by the sub. Of course, you can eliminate this problem if you only accept certificates directly from the insurance agent.
Next, if the term “binder” appears in lieu of a policy number, set a suspense for 30 days to request an updated certificate that includes a policy number.