Preventing Workers’ Comp Fraud

In early 2012, the National Insurance Crime Bureau (NICB) reported that all types of “questionable” insurance claims increased 19 percent between 2009 and 2011. Studies from 2000 estimated that one to two percent of workers’ compensation claims nationwide were fraudulent. If the NICB’s results apply to workers’ compensation claims, the percentage of fraudulent workers’ compensation claims could be way up. Knowing the signs could save you money.

A study by the Florida Division of Insurance Fraud found that fraudulent claims by employees accounted for the largest number of workers’ compensation fraud cases in that state in 2010—about 39 percent. On a national level, the NICB reported that fraud cases involving claimants increased 8 percent between 2010 and 2011 overall. More specifically, claims involving prior injuries not related to work increased by 18 percent (possibly reflecting lower health insurance coverage rates), and false disability claims increased 6 percent, but “working while collecting” cases decreased by 7 percent.

Warning Signs

There are many warning signs that employees are committing workers’ comp fraud. Any one sign may not indicate a problem, but if you see several, you need to investigate. Be aware of employees who:

• Do not have a witness to their injury.
• Delay reporting the injury.
• Have discrepancies in their story.
• Are vague on details, and the details change.
• Report being injured on a Monday.
• Report an injury just prior to a layoff.
• Do not return calls.
• Cancel doctor’s appointments.

Preventing Fraud

The first place to fight workers’ comp fraud is on the front line — with your employees. They need to believe that the company is committed to a safe, healthy work environment. They need to know they are receiving good training, so they can perform their jobs in a consistently safe manner.

Next, you need to make sure your employees understand the role of workers’ comp insurance and that it represents a significant cost to the company. Employees need to understand that the claims costs are ultimately paid by the company. These expenses affect profits and can contribute to cost-cutting measures, especially in a tough economy.

Finally, employees need to know that workers’ comp fraud is a felony (in most states), and that you will prosecute any employees who try to defraud the company. Workers’ compensation insurers aggressively pursue fraud as well.

Investigating Fraud

Many insurance companies now use sophisticated software to detect fraud as soon as the first notice of loss is filed. When that happens, your carrier may call you before you call them. Insurers also hire outside investigators to conduct legal surveillance of suspected cheats. They use GPS, night-vision lenses and other high-tech electronics to record workers doing strenuous physical activities or working a second job.

Some investigators also comb through Internet sites such as Facebook to track the activities of suspects. They use “Web crawlers” that track all references to a person — more thoroughly than a Google search. Some “injured” employees brag online about their insurance scams. Others simply provide information that leads to surveillance.

However, employers should understand privacy issues when doing a Web search. You can look at information available to the general public, but it is not ethical to “friend” someone on Facebook or any other social site to investigate them. If you have questions on where to draw the line, an attorney can help you.