Workers’ compensation insurance fraud: 10 red flags

Posted by Noff Colabella on Tue, Jul 28, 2015 @ 08:00 AM

workers'-compensation-insurance-fraudSince workers’ compensation costs are one of your biggest expenses as an employer, complications are the last thing you need when managing those costs. But that’s exactly what you get every time you have to deal with workers’ comp fraud. And whether it’s an employee filing a fraudulent claim or an unscrupulous medical provider ordering unnecessary procedures, those complications can be a serious drain on your bottom line.

It’s a growing issue with multiple pitfalls

According to the National Insurance Crime Bureau, workers’ compensation fraud accounts for roughly 25 percent of all fraud perpetrated, or approximately $7.2 billion annually. It’s one of the fastest growing areas of fraud, and it can have a snowball effect on your bottom line. Instances of fraud can lead to higher insurance premiums, which in turn could force you to reduce your workforce, reduce or freeze employees’ pay, or raise prices for your customers. And if a worker is off the job on a fraudulent claim, it’s still costing you workers’ comp benefits until the situation is resolved and legal costs to fight it, and it could lead to safety and employee morale issues as fellow workers take up the slack for the absent employee.

The first step to controlling this growing problem is recognizing the symptoms.

So how do you recognize the signs of fraud? Unfortunately, it’s rarely simple, and it helps to have an experienced claims examiner on the case. But watch for these 10 common red flags and note if the claimant: 

  1. Has a history of suspicious or litigated claims, or is eager for a settlement
  2. Threatens to see a doctor or attorney if the claim isn’t settled quickly
  3. Has injuries inconsistent with the impact of the accident
  4. Refuses to provide a sworn statement or undergo diagnostic procedures to confirm injury
  5. Is hard to reach at home while supposedly being disabled
  6. Has no corroborating witnesses or tells a different version of the accident
  7. Has medical providers or legal consultants with a history of handling suspicious claims
  8. Has a First Report of Injury inconsistent with the description of the incident in medical reports
  9. Reports an injury immediately after disciplinary action, demotion, or losing out on a promotion
  10. Delays reporting the claim without a reasonable explanation

workers'-compensation-insurance-fraudThis list certainly isn’t exhaustive, and while you can’t prevent every instance of fraud, having a solid fraud management strategy in place can help reduce it. Here are a few tips: 

  • Conduct thorough screening of job applicants with pre-employment (post-offer) reference and background checks, criminal background checks, and other tools. 
  • Build trust by creating a positive and safe work environment that includes an effective safety program and a genuine demonstration of concern about your employees’ well-being. 
  • Take a zero-tolerance stance against fraud, and make sure your employees understand that fraud affects everyone in the company and that fraud will be prosecuted. 
  • Immediately report and thoroughly investigate every accident. 
  • Encourage fraud reporting by providing a confidential hotline for employees and offering incentives. Be sure to notify your insurance company of any suspicious claims. 
  • Scrutinize all medical billings for inconsistencies or suspicious charges. 
  • Offer a robust return-to-work program to give your injured employees an incentive to get back to work.

In the end, workers’ comp fraud costs everyone – employers, employees, insurance companies, customers, and shareholders alike – and it’s a multimillion dollar problem. Learn to recognize the signs and be proactive about prevention. For more information about safeguarding your business from the debilitating costs of workers’ comp fraud, contact the New York workers’ compensation insurance experts at BNC Insurance. Think you may be overpaying for your workers’ compensation insurance? Ask about our workers’ compensation premium recovery program and request an insurance quote.