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What does Workers’ Comp premium fraud cost California?

 The Coalition Against Insurance Fraud (CAIF) estimates the annual national cost of workers’ compensation (WC) premium fraud to be $23 Billion in 2021.  Given California’s 15% share of the U.S. economy, it is estimated that the cost to California for WC premium fraud is approximately $3.5 Billion per year. 

According to the California Workers’ Compensation Institute (CWCI), direct written premiums (DWP) were $10.11 billion in 2020.[1]  

The chart below compares the estimated annual cost of workers’ compensation premium fraud in California in 2020 to the $10.11 billion in total workers’ compensation premiums collected in the California market.  The estimated $3.5 billion in annual costs due to workers’ compensation premium fraud is a whopping 35% of the total premiums collected.

To be clear, the estimated $3.5 billion in costs include a variety of inputs, such as lost premiums, lost taxes, higher costs for medical care for injured workers, and more.  The above comparison is meant to illustrate the scale of cost of workers’ compensation premium fraud, not to suggest the insurance industry is losing that amount on annual insurance premiums.

This annual cost is being shouldered by the entire economy in California in the form of higher prices, lost wages, lost tax revenues, and higher medical costs.  In the end, consumers end up paying higher prices for their goods and services.