Workers' compensation fraud costs the insurance industry roughly $5 billion each year, according to estimates by the National Insurance Crime Bureau. And depending on whom you ask, fraud accounts for as much as 10% of the costs of all workers' comp claims.
This type of fraud is typically associated with malingering employees who fake injuries in order to collect compensation and some paid vacation time.
In tougher economic times, particularly as lay-offs mount, some experts think there is an increased exposure for employees to claim a work-related injury for a variety of manufactured reasons, such as for an injury that occurred on personal time.
Anytime you feel you have a suspicious claim on your hands, look for these tell-tale signs of potentially fraudulent claims. Usually one of these items alone is not enough to point to fraud, but if you have two or more of them, it could suggest a problem.
1. Late reporting. If you have an employee who suffers a legitimate on-the-job injury, they will generally report it right away. Late reporting may not always be indicative of a fraudulent claim, though, because sometimes the true effects of an injury may not be known until the following day.
2. The Monday morning claim. If the injury allegedly occurred on Friday, usually late in the day, but did not get reported until Monday, there is reason to suspect there might be a little more going on than meets the eye. The logic is that the employee likely suffered an injury over the weekend and does not want to pay for it themselves if they lack health coverage, or if they don't want to foot the bill even for their coverage deductible.
3. Lack of witnesses. Often your employees won't be working in a solitary environment and there ought to be somebody on your staff who witnessed the accident. Still, not every claim has a witness and this should not be used solely to determine fraud.
4. Sketchy details or conflicting descriptions. Most claimants can recall the details of their injury. If the claimant seems to be fuzzy on the details and gives vague responses to questions, it could be a warning sign.
Also, if the employee's description of the accident conflicts with the medical history or First Report of Injury, there may be a problem. This could arise if, upon further investigation, the employee keeps changing the story and adding or removing pertinent information - a good reason to suspect it to be a fraudulent workers' compensation claim.
5. Disgruntled employee. A disgruntled employee is more likely to place fraudulent claims than an employee with high job satisfaction.
6. Financial hardship at home. Workers' compensation benefits are sometimes seen as a way out of a tight financial situation at home. Although temporary disability benefits are lower than normal working wages, the worker could use the time to "double dip," that is, take on extra work when they are supposed to be at home recovering from the alleged injury.
7. Hard to reach. This ties in with number 6. If this occurs every time the claimant is called, there is a possibility of fraud.
8. Misses medical appointments. If an employee is truly injured, they want to get better and will make sure to go to all medical appointments. Missing appointments is another reason to suspect fraud.
9. Engaged in activities not consistent with the injury. If your employee reported a back injury and other employees find that he is playing softball on the weekends or renovating his yard, there is good reason to suspect fraud.
10. Employment change. The employee reports the injury right before or after being laid off, near the end of a contract job or near the end of seasonal work.
11. Post-termination claims. If an employee files a claim after being laid off or fired, red flags should pop up.
12. Frequent moves and changes. The claimant has a history of frequently changing physicians, addresses and places of employment.
13. History of claims. If the claimant has filed suspicious or litigated claims in the past, they could be a person who feeds off the system.
14. Employee refuses treatment. There should be no reason that a legitimately injured worker refuses a diagnostic procedure to confirm the nature or extent of an injury.
15. Rigorous hobby. If the injured worker has a pastime that could cause an injury similar to the alleged work injury, the claim could warrant further investigation.
Remember, if you suspect fraud, you should talk to your broker or the insurance company claims representative to alert them. All insurance companies are required to have special investigation units that look into claims fraud. It benefits both you the employer and the insurer if the insurance company investigates and ferrets out a fraudulent claim.
If the insurer suspects fraud, they can reject the claim and report their suspicions to the local district attorney's office and the Department of Insurance.