How to Recognize and Prevent Workers’ Comp Fraud in Your Small Business
Workers’ compensation insurance, or workers’ comp as it’s more commonly referred to, is a form of insurance that provides medical care and/or cash benefits for workers who become sick or are injured due to their job. Workers’ comp is no-fault insurance, which means that the amount of the cash benefits or value of medical care is determined regardless of which party, if any, is at fault.
Unfortunately, too many workers fake or exaggerate injuries in order to collect workers’ comp benefits. In fact, ABC News reports that fraudulent claims amount to a minimum of $1 billion a year, accounting for as much as two percent of all workers’ comp payments.
If you’re concerned about workers’ comp fraud in your business, you’re not alone: According to the Coalition Against Insurance Fraud, more than 10 percent of small business owners share your concerns. That’s why we’ve put together some tips for recognizing and, most importantly, preventing workers’ compensation fraud.
Recognizing Workers’ Comp Fraud
While it’s not your job to investigate fraud, here are some common red flags that can indicate a claim is fraudulent:
- The timing of the claim: If the claim is filed on a Monday, then the accident could just as well have happened during the employee’s personal time over the weekend. Additionally, claims that are filed when an employee is expecting to be fired or laid off can also be questionable.
- A lack of witnesses to the accident: Depending on the situation, it can be very suspect if there wasn’t anybody else present at the time of the accident.
- An injury that’s not consistent with work tasks: Sometimes a worker has a genuine injury, but the severity isn’t consistent with any work-related tasks. For example, a repetitive strain injury in the wrist or shoulder can be caused by computer use. However, if the employee doesn’t use the computer much at work, the injury is more likely to be caused by computer use such as gaming during personal time.
- Exaggerated illness or injury: Employees may exaggerate their illness or injury in order to get more time off work and/or receive more medical benefits.
- Claiming an old injury as new: A worker may claim that an existing injury such as a knee or back problem is the result of a recent incident at work.
- Inconsistencies between the injury and the medical report: If the worker’s injuries don’t line up with his or her account of the accident, the injuries were most likely not sustained on the job.
If you believe that an employee has filed a claim fraudulently, it’s best not to approach him or her about it. Instead, contact your insurance carrier’s fraud investigation unit.
Tips for Preventing Workers’ Compensation Fraud
Now you know how to recognize worker’s comp fraud, how can you prevent it?
- Screen job applicants carefully. Applicants with any prior convictions for fraud are more likely to be a risk factor.
- Consider installing surveillance cameras. That way, you can check the validity of claims regarding accidents in the workplace.
- Establish a process for reporting workers comp claims. Assign one specific person in HR to handle workers’ comp claims. Instruct him or her on what information to gather from employees and witnesses to reveal any red flags.
- Stay in touch with employees when they’re recovering. This can help deter them from prolonging their illness or injury.
- Set up a hotline for employees to report workers’ comp fraud. Make sure it’s secure and anonymous so employees won’t fear retaliation.
Remember: Most employees are honest and wouldn’t dream of committing workers’ comp fraud. But those who aren’t afraid of submitting fraudulent claims can wind up costing you tens of thousands of dollars in terms of higher premiums.
To learn more about workers’ comp insurance or other commercial insurance, contact us today.
