Workers' compensation fraud continues to pose a major threat to the stability of the insurance system. Fraudulent claims not only increase insurance premiums but also compromise the resources available to individuals with a legitimate claim. To maintain the integrity of the system, regulatory agencies across the state have taken on the essential task of enforcing laws, investigating abuse, and educating the public about compensation policies. These efforts help protect access to compensation benefits for those suffering from workplace injuries and ensure fair compensation coverage through trusted compensation insurance carriers.

California Department of Insurance (CDI) Fraud Division

As one of the leading regulatory agencies in the state, the CDI’s Fraud Division was established in 1979 and is now the largest law enforcement unit within its Enforcement Branch. Its core mission is to detect and prevent insurance fraud, including compensation fraud, which continues to cost the system billions. In the fiscal year 2022–23 alone, the division reported 2,846 suspected fraudulent claims, assigned 597 new investigations, and made 164 arrests—all aimed at curbing false claims that burden the system. These actions by fraud units led to 257 case referrals to prosecutors, with estimated losses exceeding $404 million.

The CDI's collaboration with other law enforcement agencies ensures that fraudulent activities involving compensation claims, compensation insurance carriers, and service providers are addressed swiftly and thoroughly. These coordinated efforts contribute to successful prosecutions that deter future offenders and safeguard legitimate compensation benefits. They also help stabilize compensation premiums by reducing the financial impact of fraudulent activity across the system.

California Department of Industrial Relations (DIR) Anti-Fraud Unit

Another key player among state regulatory agencies is the Anti-Fraud Unit within the DIR. This unit focuses on removing corrupt service providers from the compensation system, particularly those facing criminal penalties or charged with filing false claims. Under its authority, providers with fraud-related convictions are automatically suspended from participating in compensation policies. Furthermore, the unit imposes automatic stays on liens filed by those under criminal investigation—protecting the integrity of claims and reducing medical expenses incurred by compensation insurance carriers due to fraudulent activity.

This rigorous oversight is vital in ensuring that health services and other essential support are only offered through verified service providers and medical providers committed to ethical practice. These interventions also help manage the aggregate assessment of system-wide losses due to abuse. Keeping dishonest health care providers and medical providers out of the system further helps control compensation premiums and ensures that each injured worker receives care from trustworthy professionals.

District Attorneys and Prosecution Success

State regulatory agencies work closely with county district attorney offices to prosecute compensation fraud. In the 2022–23 fiscal year, 35 counties were awarded $51.2 million to support fraud investigation and legal actions. These district attorneys reported 1,512 investigations, 341 arrests, and 242 convictions. Such successful prosecutions often result in court-ordered restitution and reinforce the consequences of compensation fraud.

The synergy between district attorneys and fraud units leads to improved monitoring of compensation insurance carriers and enhanced accountability for criminal penalties resulting from false claims. The recovered restitution—$38.6 million ordered, with $22.1 million collected—underscores the importance of consistent enforcement and support from compensation boards across California.

Public Reporting, Education, and Prevention

In addition to enforcement, regulatory agencies prioritize public awareness. The CDI provides online portals and hotlines for reporting suspected compensation fraud, giving consumers and insurers the ability to flag fraudulent claims. The DIR complements this by offering educational resources tailored for employers, employees, and service providers. These initiatives encourage better understanding of compensation coverage and deter future abuse.

Public education on how to detect fraudulent claims or verify compensation insurance carriers is a cornerstone in reducing system-wide fraud and managing the aggregate assessment across compensation policies. Outreach efforts also highlight the role of health services and service providers in complying with regulations, promoting fair access to benefits and protecting the rights of every injured worker.

Strengthening the System Through Oversight

Through thorough oversight, inter-agency cooperation, and educational programs, California’s regulatory agencies are actively addressing the risks of compensation fraud. Their efforts help ensure that workplace injuries are treated with fairness, that medical expenses are justified, and that fraudulent actors face criminal penalties.

As these agencies continue to strengthen regulations and pursue fraud investigations, they protect not only compensation insurance carriers but also the millions who depend on legitimate compensation claims to recover and return to work. These efforts contribute to a stronger, more efficient system that preserves trust in compensation insurance while helping manage compensation premiums for businesses and individuals alike.

If you suspect you've been affected by compensation fraud or believe your insurance certificate is fraudulent, please contact the proper authorities or submit a report via our contact form at CheckMyCert.org.