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Best Practices: Top 10 Warning Signs of Workers Comp Fraud

Published on May 14, 2018

Nearly 3,600 accounting, bookkeeping, tax preparation and payroll services firm employees reported a non-fatal occupational injury or illness in 2016, according to the U.S. Bureau of Labor Statistics. While most workplace injuries and illnesses are legitimate, occasionally employees try to manipulate the system by filing a false or exaggerated workers’ compensation insurance claim. 

Workers’ compensation insurance fraud is a serious crime that costs businesses $30 billion annually, according to estimates from the National Insurance Crime Bureau. There are different types of workers’ compensation insurance fraud, but one of the more common is claim-related fraud. It occurs when an employee falsely states an injury or illness happened at work or exaggerates an existing injury or illness to gain a workers’ compensation insurance benefit.

Not only is claim-related fraud illegal, it strains a business’s operations, leads to higher insurance costs and undermines honest workers who are legitimately injured on the job. 

Fraud warning signs

While there is no silver bullet to identify claim-related workers’ compensation fraud, business owners can watch out for several red flags. The presence of two or more of the following indicators should raise suspicion and trigger further investigation. 

1. Monday morning injury reports: The alleged injury occurs first thing Monday morning, or the injury occurs late Friday afternoon but is not reported until Monday. 

2. Employment change: The reported accident occurs immediately before or after a job termination, layoff, end of a big project or the conclusion of seasonal work. 

3. Suspicious providers: An employee’s medical providers or legal consultants have a history of handling suspicious claims, or groups of claimants used the same doctors and lawyers. 

4. No witnesses: There are no witnesses to the accident and the employee’s own description does not logically support the injury cause. 

5. Conflicting descriptions: The employee’s accident description conflicts with the medical history or injury report. 

6. History of claims: The claimant has a history of making suspicious claims. 

7. Treatment is refused: The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury. 

8. Late reporting: The employee delays reporting the claim without a reasonable explanation. 

9. Claimant is hard to reach: The allegedly disabled claimant is hard to reach at home. 

10. Changes: The claimant has a history of frequently changing physicians, addresses or jobs. 

Suspicion of fraud should be reported immediately to the workers’ compensation insurance carrier or the appropriate law enforcement authorities. Be sure to gather as much information as possible to support the assertion, including identifying misstatements and witnesses. If the suspicion results in a criminal conviction, your insurance agent can help get the fraudulent claim or the fraudulent portion of the claim removed from your business’s experience rating. 

It is important to convey clearly and continuously to all employees a commitment to workplace safety and a zero-tolerance policy for workers’ compensation insurance fraud. Ask your insurance carrier for anti-fraud materials, such as posters or payroll stuffers, and educate employees about the adverse impact that fraud can have on the business. 

Workers’ compensation fraud is a serious crime that can have many negative consequences. 

By knowing what signals to look for, accounting firm owners can potentially minimize the costs they might otherwise incur. 

(Source: AccountingToday - Daily Edition - Voices - April13, 2018)