How to Catch Workers’ Compensation Fraud

Author: Gina Hall | April 27, 2016

Running a small business is hard enough—keeping customers happy, maintaining finances, staying one step ahead of the competition, and, all the while, keeping your own ship running smoothly. With all that on your plate, handling potential workers’ compensation fraud comes as an especially tough blow because it comes from someone on your own team.

A recent poll from workers’ compensation insurer Employers Holdings Inc. explained that 13 percent of small business owners are “concerned that one of their employees would commit workers’ compensation fraud by faking an injury or illness in order to collect benefits.”

The phone survey collected data from a national sample of more than 500 small businesses, each employing fewer than 100 workers. It estimates that fraudulent claims account for at least 10 percent of all claims. It also reported that one in five business owners said they feel unprepared or uncertain of their ability to identify such fraud.

Here is a list of nine warning signs the report recommends business owners should look for if they suspect a workers’ compensation claim might be fraudulent.

1. History of possible compensation fraud

The employee has a record of filing suspicious workers’ compensation claims or a history of frequently changing physicians or jobs.

2. Questionable third parties

The doctors and lawyers the employee uses have a history of handling fraudulent claims, a reputation for malfeasance, or have been in trouble with the ethical bodies which govern their respective professions.

3. No witnesses

The incident occurred off-camera with no witnesses, and the employee’s description of the cause of injury sounds suspicious.

4. Start-of-shift incident

The alleged injury occurs either first thing on a Monday morning or late on a Friday afternoon but is not reported until the Monday after.

5. Conflicting reports

The claimant’s account of the incident conflicts with the alleged injuries sustained or the medical report.

6. Late reporting

Rather than file immediately, the employee inexplicably delays reporting the claim.

7. Treatment refusal

The employee refuses a diagnosis to determine the nature or extent of the injury.

8. Hard to reach

The claimant does not respond to calls or other messaging attempts.

9. Changes in employment status

The incident occurred at the end of seasonal employment or the conclusion of a large project, prior to or following a labor strike, or if layoffs are imminent or rumored.

Of course, these indicators do not necessarily indicate the situation is fraudulent, but they are red flags for business owners to watch for. The report notes there is no “silver bullet” when it comes to identifying claim-related workers’ compensation insurance fraud. Instead, one should look for a “pattern of events or multiple indicators” before jumping to conclusions.

If you suspect a worker might be filing a fraudulent claim, alert your concerns to the fraud unit or special investigations division of your insurance company’s claims department. Following their investigation, the appropriate law enforcement authorities will be notified if the company deems the claim as suspicious.

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