The workers’ compensation (WC) insurance system is a no-fault method of paying workers for medical expenses and wage losses due to on-the-job injuries. While the majority of WC claims are truthful, the National Insurance Crime Bureau reports that billions of dollars of false claims are submitted each year. To help you detect possible WC fraud, experience shows a claim may be fraudulent if two or more of the following factors are present:
- Monday Morning: The alleged injury occurs either “first thing Monday morning,” or late on a Friday afternoon but not reported until Monday.
- Employment Change: The reported accident occurs immediately before or after a strike, a layoff, the end of a big project or at the conclusion of seasonal work.
- Job Termination: If an employee files a post-termination claim:
- Was the alleged injury reported by the employee prior to termination?
- Did the employee exhaust his/her unemployment benefits prior to claiming workers’ compensation benefits?
- History of Changes: The claimant has a history of frequently changing physicians, addresses and places of employment.
- Medical History: The employee has a pre-existing medical condition that is similar to the alleged work injury.
- No Witnesses: The accident has no witnesses, and the employee’s own description does not logically support the cause of injury.
- Conflicting Descriptions: The employee’s description of the accident conflicts with the medical history or First Report of Injury.
- History of Claims: The claimant has a history of numerous suspicious or litigated claims.
- Treatment is Refused: The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury.
- Late Reporting: The employee delays reporting the claim without a reasonable explanation.
- Hard to Reach: You have difficulty contacting a claimant at home, when he/she is allegedly disabled.
- Moonlighting: Does the employee have another paying job or do volunteer work?
- Unusual Coincidence: There is an unusual coincidence between the employee’s alleged date of injury and his/her need for personal time off.
- Financial Problems: The employee has tried to borrow money from co-workers or the company, or requested pay advances.
- Hobbies: The employee has a hobby that could cause an injury similar to the alleged work injury.
Fraudulent workers’ compensation claims are estimated to cost employers several billion dollars annually. Ranging from employees squeezing a few extra days off work to completely fabricated injuries, fraudulent claims can increase your premium costs and negatively influence your bottom line. To reduce costs associated with fraudulent claims, it is important you know how to detect signs of fraudulent activity. While you may not be an expert at fraud detection, there are resources you can turn to when you have reason to doubt the legitimacy of a claim.
Special Investigation Units
Many insurers have special investigation units (SIU) that are experienced in exposing fraud. Insurers recognize that while the average employer may be able to recognize some signs of a possible fraudulent claim, they may not have the resources or training to successfully investigate the situation. When you suspect the legitimacy of a claim an SIU can investigate, drawing on a wealth of experience and resources to discover and document any fraudulent activity that has occurred.
While large insurers often employ their own in-house SIUs, many smaller insures use groups like the National Insurance Crime Bureau (NICB), whose purpose is to identify and stop fraudulent insurance activity, as their SIU.
While SIUs are there to help, not everything can be left up to them. It is important that you take proactive measures to eliminate fraudulent activity before it requires the attention of an SIU.
Controlling Workers’ Compensation Costs
There are many ways for you to control workers’ compensation costs for your small business. The most important is to convince your employees that maintaining a safe workplace is vital and will consequently reduce your insurance costs.
Here are some other ways to control costs:
- Implement a return-to-work policy in which employees work modified duty until they are fully healthy to do their jobs.
- Understand the elements that contribute to your workers’ compensation costs. It is vital that you understand the impact that each brings to your overall pricing.
- Orient and train your employees on safe practices necessary for their job functions and tasks.
- Insist that employee claims are reported promptly, as statistics reveal that for every week that a claim goes unreported, the cost can increase as much as 50 percent.
- Investigate the cause of injuries and illnesses. While one injury may be behind you, others will take its place unless you do something to reduce the change of the incident occurring again.
Strong workplace safety programs make it harder for dishonest employees to fabricate workplace injuries. Also, set strict injury reporting guidelines so you can monitor the claim from the onset. Finally, whether it is discovered by you or an SIU, vigorously prosecute all fraud-related cases. It is important to show that your organization will not tolerate any abuse of the workers’ compensation system.
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