Workers compensation fraud has a cost burden of about $7.2 billion per year, according to the National Insurance Crime Bureau (NICB). This cost impacts employers, workers, consumers, and shareholders. There are many types of workers compensation fraud, and it can be perpetrated by anyone in the system. This article focuses on identifying and preventing workers compensation fraud committed by employees in the workplace.
Most employees are honest. It’s a small percentage who commit fraud and increase costs for everyone. When fraud is uncovered, it is often associated with a combination of the circumstances below. Being aware of this list, and knowing when fraud is more likely to happen, can help you identify potential fraud.
Never accuse an employee of filing a fraudulent claim. Most claims are legitimate, and making a false accusation can lead to claims of harassment and defamation. If you suspect fraud, simply contact your insurance carrier, claims adjustor, or state fraud unit immediately.
- The injured employee has a history of frequently changing jobs, medical providers, or addresses.
- The employee has a history of multiple workers compensation claims.
- The injured employee is difficult to reach at home.
- The employee’s description of the accident is vague, contradictory, or doesn’t support the cause of injury.
- The reported injury occurred immediately before or after employment changes, such as termination of employment, layoff, the end of a big project or of seasonal work, or a labor force strike.
- The injury isn’t reported immediately, and the employee has no reasonable explanation for the delay.
- The injury is reported as occurring late Friday or early Monday morning. The injury may have actually come from a non-work-related activity.
- There are no witnesses to the accident.
- The injured employee refuses a diagnostic procedure to confirm the nature or extent of the injury.
- The injured employee refuses the opportunity to return to work on modified duty and/or delays returning to work after maximum medial improvement.
- The injured employee is found participating in work or recreational activities that are not consistent with the reported injury and claimed physical limitations.
The following steps can help you prevent workers compensation fraud before it happens:
- Listen to your employees. The Coalition Against Insurance Fraud indicates: “The strongest predictor of fraud is a chronically disgruntled workforce.”1 Are there frequent complaints and concerns about working conditions? If so, take action to correct the situation and show you care about safe working conditions.
- Carefully screen job applicants. Good predictors of fraud often include criminal backgrounds and a history of suspicious injury claims.
- Stay in close contact with injured employees. Frequent communication will help an injured employee feel valued and know that someone cares. This can also help encourage an early return to work because the employee knows their progress is being monitored.
- Implement modified duty. Bringing your employee back to work as soon as possible, even with modified job duties, can help reduce medical costs and increase communication.
- Establish and follow a consistent procedure for reporting and investigating all accidents. Document all reported injuries. Interview the injured employee for details of the accident. Also interview witnesses and get written statements. Pay attention to what other employees are saying to each other about the accident.
- Communicate your policy on workers compensation and injury management to your employees on an annual basis (and to new employees as part of the new hire orientation). Help employees understand that it is their right to seek workers compensation for legitimate work-related injuries, but make sure they understand fraud is illegal and will not be tolerated.
- Establish a fraud-reporting process to allow employees and supervisors to report suspected fraud to management. In no case should anyone in the company make any accusations. All cases of suspected fraud should be reported to your insurance company or the insurer’s special investigative unit immediately.
- Educate your employees. Studies have found that employees who have been educated on the purpose and program benefits of the workers compensation system are less likely to commit fraud. Help your employees understand what fraud is and the consequences. Re-enforce that they are the real losers when fraud occurs – if your premiums are excessively high, this takes away your ability to reward employees with raises, bonuses, and other incentives.
With early intervention and the establishment of firm policies and procedures, you can make an impact on the occurrence of fraud in the workplace. To learn more about identifying and preventing workers compensation fraud, please contact your Leavitt Group insurance consultant.
1 https://rccustomers.travelers.com/riskcontrol/rcpublicdocs.nsf/0/D04329CBC4970CB985257515007678BA/$FILE/A0174_ManagingWCFraud.pdf
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