Spotting red flags of fraud to protect your business

Workers’ compensation fraud is a serious crime that can significantly impact business operations and lead to higher insurance costs for businesses. While workers’ compensation insurance is designed to protect employers and employees should an on-the-job injury or illness occur, sometimes dishonest workers attempt to take advantage of the system by conducting what is known as claim-related workers’ compensation fraud.

In fact, this is a concern for many business owners. According to a recent survey from EMPLOYERS, a specialty workers’ compensation carrier based in Reno, more than one in ten small business owners are concerned that their employees would commit workers’ compensation fraud by faking an injury or illness to collect benefits. This is just one of a multitude of ways for an employee to make a fraudulent claim.

Below are three common types of workers’ compensation claim-related fraud:

The exaggerated claim: When a worker who initially sustained a legitimate work-related injury exaggerates its severity to collect more money and/or stay off the job for a longer period of time than necessary.

Working while collecting benefits: When the claimant receiving workers’ compensation benefits states that he or she is not able to work, but is actually working at another job to simultaneously collect benefits and an additional salary.

The false claim: The injury in question either never occurred, or was knowingly misrepresented as a work-related injury to collect medical and/or wage benefits. An employee staging an accident or intentionally injuring him or herself to collect medical and/or wage benefits also falls into this category.

The same EMPLOYERS survey also found that one in five small businesses feel unprepared or unsure of their ability to identify workers’ compensation fraud. Below are red-flag indicators of potential fraud to help business owners protect themselves against this crime.

While there are many warning signs of workers’ compensation claim-related fraud, experience shows that when two or more of the following factors are present in a claim, there is a greater chance it may be fraudulent.

Monday morning or beginning of shift reports: The alleged injury occurs at the beginning of a worker’s shift or first thing on Monday morning. Also be vigilant when the alleged injury occurs late on Friday afternoon but is not reported until Monday.

Suspicious providers: An injured 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.

Conflicting descriptions: The employee’s description of the accident conflicts with the medical history, the first report of injury, or other witness statements.

Treatment is refused: The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury.

Claimant is hard to reach: The allegedly disabled claimant is hard to reach at home.

Employment change: The reported accident occurred immediately before or after a strike, job termination or layoff, at the end of a big project or at the conclusion of seasonal work.

No witnesses: There are no witnesses to the accident and the employee’s own description does not logically support the cause of injury.

History of claims: The claimant has a history of a number of suspicious or litigated claims.

Late reporting: The employee delays reporting the claim without a reasonable explanation.

Changes: The claimant has a history of frequently changing physicians, changing addresses and numerous past employment changes.

Suspicion of potential fraud should be reported immediately to the business’ workers’ compensation insurance carrier or local authorities, such as the Nevada Attorney General’s Workers’ Compensation Fraud Unit, for investigation.

Additionally, business owners should clearly and continuously communicate a zero-tolerance policy for workers’ compensation fraud to their employees, while also reinforcing their commitment to creating the safest possible workplace.

As part of this, business owners should educate their employees on the negative impact that workers’ compensation fraud can have on the interests of all company stakeholders, including employees. Businesses can ask their insurance agent or carrier for anti-fraud materials to help reinforce this commitment.

Workers’ compensation claim-related fraud can be a costly crime, but by knowing what signals to look for, business owners can potentially prevent or mitigate the effects of insurance fraud on their business.

Ranney Pageler is vice president of the fraud investigations department at EMPLOYERS, which offers workers’ compensation insurance and services through Employers Insurance Company of Nevada, Employers Compensation Insurance Company, Employers Preferred Insurance Company and Employers Assurance Company. For more information, contact fraudfighters@employers.com or visit www.employers.com.