Fraud adds to workers' compensation costs for all businesses, but it hits small businesses the hardest as they may not have the resources to identify bogus claims.
According to a new study by workers' comp insurer Employers Holdings Inc., about 20% of small business owners are not sufficiently prepared to identify workers' comp fraud.
It's estimated that at least 10% of workers' compensation claims are fraudulent, and identifying those illicit claims would keep your workers' comp claims in check and reduce your premiums.
Claims fraud happens when an employee tries to gain workers' comp benefits by falsely stating that an injury or illness occurred at work, or by exaggerating an existing injury or illness.
"Workers' compensation fraud ... can strain business operations, lead to higher insurance costs for businesses, and even undermine honest workers who are legitimately injured on the job," said Ranney Pageler, VP of fraud investigations at Employers.
The disconnect
The study found that:
- 13% of small business owners are concerned that one of their employees would commit workers' comp fraud by faking an injury or illness to collect benefits.
- 21% said they are unsure of their ability to identify fraud.
- 24% of small business owners have installed surveillance cameras to monitor employees on the job.
The strongest indicators of potential claims fraud noted by survey respondents include:
- The employee has a history of claims (58%).
- There were no witnesses to the incident (52%).
- The employee did not report the injury or illness in a timely manner (52%).
- The reported incident coincides with a change in employment status (51%).
Nipping fraud in the bud
Investigator Pageler recommends that small business owners look for the following warning signs:
- Monday morning (or start of shift) injury reports. The alleged injury occurs first thing on Monday morning, or the injury occurs late on Friday afternoon but is not reported until Monday.
- Employment changes. The reported accident occurs immediately before or after a strike, job termination, layoff, end of a big project or the conclusion of seasonal work.
- Suspicious providers. An employee's medical providers or legal consultants have a history of handling suspicious claims, or the same doctors and lawyers are used by groups of claimants.
- No witnesses. There are no witnesses to the accident and the employee's own description does not logically support the cause of the injury.
- Conflicting descriptions. The employee's description of the accident conflicts with the medical history or injury report.
- History of claims. The claimant has a history of suspicious or litigated claims.
- Refusal of treatment. 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.
- Claimant is hard to reach. The allegedly disabled claimant is hard to reach at home and does not respond promptly to messages.
- Frequent changes. The claimant has a history of frequently changing physicians, addresses or jobs.
It should be noted that one of these indicators on its own may not be indicative of fraud, so don't jump to conclusions.
What to do if you suspect fraud
Employers who suspect a worker may be committing claims fraud should first alert the special investigations unit or fraud unit within their insurance company's claims department.
If your complaint is found to have merit and they believe the claim may be fraudulent, the insurer may report it to the appropriate law enforcement authorities. But that will only happen after the insurance company has conducted its own investigation.
Give us a call if you have any questions regarding a claim.