Fraud eats away at workers’ comp costs for all businesses, but it hits small firms 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’ compensation fraud.
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.
Indicators of Potential Fraud
- 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 coincided with a change in employment status (51%).
What You Can Do
Insurer Employers Holdings 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 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: The 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 description doesn’t make sense.
- Conflicting descriptions: The worker’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. If you suspect a worker may be committing claims fraud, you should first alert the special investigations unit or fraud unit within your insurance company’s claims department.