Fighting Fraud

Many Small Businesses Hazy on Red Flags for Fraud

According to a recent survey, a significant number of small employers don't feel confident in their ability to identify workers' comp fraud.
By: | August 17, 2015

Nearly one-quarter of employers surveyed are unsure they can identify workers’ comp fraud. Even more say they have installed surveillance cameras to monitor employees on the job.

Those findings are included in a survey that showed more than 1 in 10 small business owners are concerned their employees would commit workers’ comp fraud by faking an injury or illness.

Employers Holdings, a holding company with subsidiaries that are specialty providers of workers’ compensation insurance and services, facilitated a telephone survey in May with a national representative sample of 501 small businesses that have fewer than 100 employees.

“There is no silver bullet when it comes to identifying claim-related workers’ compensation insurance fraud.” — Ranney Pageler, vice president of fraud investigations, Employers

“Workers’ compensation fraud is a serious crime that can strain business operations, lead to higher insurance costs for businesses, and even undermine honest workers who are legitimately injured on the job,” said Ranney Pageler, vice president of fraud investigations at Employers.

“When we look at fraud cases that result in criminal convictions, about half of them are caught within the claims process itself and the other half are tip-offs from the employee’s coworkers, friends, or family members, or from workplace surveillance video.”

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Respondents to the survey cited various activities as potential indicators of workers’ comp fraud. More than half said “the employee has a history of claims,” “there were no witnesses to the incident,” “the employee did not report the injury or illness in a timely manner,” and “the reported incident coincides with a change in employment status.”

Pageler said within the claim examination process, common red flags include an employee using a false Social Security number, having previously undisclosed injuries or medical conditions, or having a permanent total disability claim with total medical costs of less than $500 over a 12-month period.

“There is no silver bullet when it comes to identifying claim-related workers’ compensation insurance fraud,” he said. “Instead, you’re looking for a pattern of events or multiple indicators that suggest something may be amiss.”

Additional warning signs may include:

  • The alleged injury occurs first thing on Monday morning or late on Friday afternoon but is not reported until Monday.
  • The reported accident occurs immediately before or after a strike, job termination, layoff, end of a big project, or the conclusion of seasonal work.
  • An employee’s medical providers or legal consultants have a history of handling suspicious claims, or the same doctors and lawyers are used by groups of claimants.
  • The employee’s description of the accident conflicts with the medical history or injury report.
  • The allegedly disabled claimant is hard to reach at home and does not respond promptly to messages.

“Employers who suspect an employee may be committing claim-related workers’ compensation insurance fraud should first alert the special investigations unit or fraud unit within their insurance company’s claims department,” the company advised. “The appropriate law enforcement authorities will likely be brought into the investigation, as well.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]