Workers' compensation insurance is a type of insurance that provides medical and disability coverage for employees who suffer work-related injuries and illnesses.
While most workers' compensation claims are legitimate, some are inflated or fraudulent. Workers' compensation fraud occurs when someone knowingly makes a false statement or conceals information to obtain workers' compensation benefits or to prevent someone from receiving benefits to which they might be entitled.
Workers' compensation fraud, however, is not rampant. Nationwide studies have shown that only a small percentage of workers' compensation claims are fraudulent. Nevertheless, this type of fraud is costly. Not only does workers' compensation fraud cost insurers billions of dollars every year, it results in higher health care costs and insurance rates for U.S. businesses (according to "Risk Control: Managing Workers' Compensation Fraud" published by Travelers Indemnity Company in 2008).
There are several steps that management and HR teams should take to minimize the risk of claimant fraud and the damage it can cause. For one thing, management should develop and maintain a safe work environment to prevent workplace accidents and control workers' compensation claims. For another thing, leadership should develop post-injury management programs that help guide behavior when workplace accidents do occur.
Also, managers should adopt zero-tolerance policies regarding fraud, meaning that they will investigate and seriously deal with all suspected incidents of fraud. Furthermore, organizations should work with their insurance carriers' fraud investigation units to stay abreast of potential schemes. Finally, organizations' leaders should educate their employees about the various workers' compensation fraud types, schemes and associated red flags.
As instances of claimant fraud rise, management should be aware of the following red flags that can signal abuse:
- The claimant is engaged in seasonable work that is about to end.
- The claimant is a new employee, disgruntled, on probation, facing layoff or about to retire.
- The claimant has a poor attendance record.
- The claimant has financial problems.
- The claimant waited days or weeks before reporting the accident or injury.
- The accident or injury reportedly occurred late Friday or early Monday morning, indicating that it actually occurred off the job over the weekend.
- There are no witnesses to the reported accident or injury, or the only witnesses are individuals who have a "close" relationship with the claimant.
- The claimant provides vague or inconsistent details about the accident or injury.
- The claimant and witnesses provide conflicting details about the accident or injury.
- The accident or injury reportedly occurred at a location away from where the claimant normally works.
- The claimant's coworkers express doubt about whether the accident or injury actually occurred.
- The claimant is unusually pushy about settling the claim.
- The documentation presented by the claimant contains irregularities or questionable content.
- The claimant is involved in physical hobbies or sports.
- The incident report and the medical evaluation contain conflicting information.
Workers' compensation fraud continues to thrive, but management can minimize the risk of such schemes by committing to work safety, implementing post-injury management programs, adhering to zero-tolerance policies, working with insurance carriers and educating employees. And because evidence of illegal activity can come from almost anywhere, as demonstrated by The Price Is Right fraud bust, managers, workers and fraud examiners must be vigilant in their efforts to identify this and similar types of fraud.