Controlling Costs by Curtailing Workers’ Comp Fraud

While most workers’ compensation claims stem from real instances of on-the-job injuries, there are, unfortunately, people who cheat the system, driving up costs for employers, consumers and insurers.

According to the Texas Department of Insurance, insurance fraud is one of the most costly white-collar crimes in the United States, ranking second only to tax evasion. It has been noted that if workers’ comp fraud were a legitimate business in the United States, it would rank among the Fortune 500 companies — likely in the top 25.

Fraud is lying for financial gain. Claimant fraud, the most common type, happens when employees:

• Fake or exaggerate injuries.
• Collect benefits for injuries that were not work-related.
• Continue to collect benefits after returning to work.

The National Insurance Crime Bureau estimates that workers’ comp fraud costs insurers $7.2 billion a year — about 25 percent of the $30 billion that fraud costs insurers annually.

Employers can help by paying close attention to red flags that often indicate possible workers’ comp fraud. The existence of two or more of the following could be a signal that a fraud has occurred:

• A tip from a credible source, such as an employee of your company
• An injury to a new or disgruntled worker
• There is no witness to an alleged injury
• Inconsistent or illogical descriptions of how an injury occurred
• Difficulty in contacting an injured worker
• An injured worker who’s upset when he or she is contacted
• A suspicious injury occurring on a Monday or Friday
• An injury not reported until a week or more after it allegedly occurred
• An injured worker engages in activities that are inconsistent with his/her injuries

Red flags do not necessarily translate into proof of the offense, but they are indicators.

Workers’ comp fraud can be curtailed if employers, agents, insurers and employees are vigilant about this type of crime.