Fraudulent Workers' Comp Claims

Fraudulent Workers’ comp claims occur more than businesses might want to admit. However, this kind of fraud negatively impacts their business, legal status, and bottom line. In practice, workers’ comp fraud is usually an utterly false injury. Or, it could be a legitimate injury sustained on the job that is significantly exaggerated by the employee to claim more insurance money. It’s a costly issue, costing American businesses an annual price tag of nearly $80 billion.

Knowing how to combat a fraudulent workers’ comp claims schemes can help to weed out the fraudsters, protect businesses from higher premiums, and cut down on losses related to fraudulent claims. Read below for more information on spot workers’ compensation fraud and prevent it from happening.

What is Workers’ Compensation Fraud?

Workers’ compensation fraud comes in different forms. Essentially, workers’ compensation fraud is any lie or falsification made by employers, employees, or providers to benefit financially. According to statistics from ABC, nearly two percent of all workers’ compensation payments are fraudulent.

More specifically, workers’ compensation fraud can occur when an employee lies about the injury they received on the job, or illness, such as recent claims around workers contracting COVID-19 while working at Walmart, as reported earlier this year. Fraud can also occur when an employer misclassifies employees, such as classifying them as a contractor instead of a permanent employee to avoid paying for workers’ compensation insurance, or when employees exaggerate their symptoms to get more money.

Here are some red flags to spot when it comes to potential workers’ compensation fraud claims:

  • Shady Finances: If an employee has financial issues, they may see workers’ compensation claims as a benefit. Find out if the employee has financial problems, is in the middle of divorce or business loss, or if they took time off just before an injury. Business owners can check if their spouse is working or receiving these payments, such as welfare, unemployment, or workers’ compensation benefits.
  • Lack of Witnesses: if the employee usually works with others, there should be a witness available to reach to corroborate the employee’s injury claim. If there is no witness account of the accident or a witness account doesn’t match the employee’s description, this can come off as highly suspicious.
  • History of Claims: If a claimant has made a long list of reports over the years, this comes off as justifiably suspicious. A history of prior claims won’t be made known unless they take a deep dive into the employee’s or employer’s records. If there is a history of claims coupled with a constant stream of injuries, this comes off as anything but genuine.

How to Mitigate Workers’ Compensation Fraud

Small business owners may experience higher insurance premiums due to fraudulent claims. Future claims filed by employees with previous fraudulent red flags may also face further examination. Every open workers’ compensation claim is subject to detailed inspection and research, which provides information about prior claims from both the employee and policyholder.

Apart from identifying the red flags noted above, businesses can do their best to cut down on the risk of fraudulent claims by doing the following:

  • Keep Accurate Records: Employers may have accidentally misclassified an employee, putting them in a position to seem suspicious. Some employers may also incorrectly classify employees with high-risk jobs, including construction workers, as an employee with a low-risk job, like an office worker. It’s essential to maintain accurate payroll information as workers’ compensation premiums are calculated based on the size of a business’s payroll. 
  • Establish a Zero-Tolerance Policy: Fraudulent activity can impact the employee’s job and the business. It also has the potential to increase insurance premiums. Employees need to establish a zero-tolerance policy regarding fraud by communicating the business’ expectations and providing employees with written procedures to encourage transparency. 
  • Provide Multiple Avenues to Report Fraud: Employers should create an environment where employees don’t fear retaliation if they come forth with anonymous tips on workers’ compensation fraud. Businesses can accomplish this by setting safe ways for employees to report suspicious and potentially fraudulent activities.

Workers’ compensation fraud is a significant problem that can have real-world impacts on business owners, their employees, and their bottom line. By demonstrating a strict policy and heeding the red flags mentioned here, they can cut down on the risk of potentially fraudulent activity.

About InsureMyWorkComp & Their Workers Comp Solutions

InsureMyWorkComp is a digital brokerage that helps clients find the right workers’ compensation solution for their business needs, such as occupational accident insurance. Unlike other online platforms, we will help you to work with an agent who can provide you the right solution for your risk profile. Our staff has over 50 years of workers’ compensation underwriting and sales experience, and we are confident that we will provide you the support that you need. For more information or to get a quote, contact us today at (855) 340-9138.