Detecting Workers’ Comp Fraud

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One in five small business owners feel unsure about how to identify scams involving workers’ compensation.The workers’ compensation system exists to help people who suffer injuries on the job, providing payments for medical expenses and lost wages. Sadly, workers’ compensation fraud is a big problem.

A 2017 publication from The National Insurance Crime Bureau (NICB) said workers’ compensation fraud is a major contributor to the $30 billion in annual insurance fraud.

“These crimes range from people who fake an injury while on the job in order to collect workers’ compensation insurance, to organized criminal conspiracies of crooked physicians, attorneys, and patients who submit false and exaggerated medical claims to insurance companies. We all pay the price for these crimes, and that’s a bitter pill for us to swallow,” the NICB publication said.

Statistics from the Coalition Against Insurance Fraud showed one in five small business owners feel unsure about how to identify scams involving workers’ compensation.

Managers who understand occupational health and safety terminology and the workers’ compensation fraud indicators and know how to prevent workers’ compensation fraud can work to create safe and healthy workplaces.

Eastern Kentucky University’s bachelor degree in occupational health and safety provides knowledge of workers’ compensation issues and positions graduates for success in various occupational health and safety career opportunities.

Types of Workers’ Compensation Fraud

Workers’ compensation fraud falls into several categories, including:

  • False claims: The injury or accident never occurred, or the claimant misrepresented it as happening at work.
  • Working and collecting benefits: People claim they cannot work and collect benefits while working at another job.
  • Exaggerating: The claimant had an injury and exaggerates its severity to collect money and not work.

The NCIB also discusses what it calls “medical mills” or clinics that are a front for insurance fraud. These businesses are where medical professionals, attorneys, or insurance representatives often solicit people for treatment, encouraging them to report or exaggerate injuries. 

Common Fraud Warning Signs

A 2015 poll by EMPLOYERS, a small-business insurance specialist, reported that one in 10 small business owners said they are concerned an employee will fake or exaggerate an injury to claim workers’ compensation benefits.

“There is no silver bullet when it comes to identifying claim-related workers’ compensation insurance fraud,” Ranney Pageler, vice president of fraud investigations at EMPLOYERS, said in the poll report. “Instead, you’re looking for a pattern of events or multiple indicators that suggest something may be amiss.”

EMPLOYERS and other publications list several workers’ compensation fraud indicators:

  • Making a claim on a Monday morning or at the beginning of a shift.
  • Delays reporting a claim without a good explanation.
  • Claiming an injury just before a job termination, layoff, ending of a large project, or the finishing of a period of seasonal work.
  • Listing medical providers or legal consultants who have a history of handling suspicious claims and who have handled claims for other employees.
  • No witnesses to the accident.
  • An employee’s description of the cause that conflicts with medical history or the injury report.
  • A claimant who has a history of making suspicious claims.
  • Refusal of diagnostic procedures that could confirm the nature and severity of the injury.
  • An employee who has another job or is difficult to reach when allegedly unable to work.
  • The report coincides with the date of injury and a request for time off.
  • Hobbies that could cause similar injuries.
  • Financial problems plaguing the claimant.
  • A pre-existing condition that is similar to the on-the-job injury.

“Experience shows that when two or more ‘red flags’ are present in a workers’ compensation claim, there is a chance the claim may be fraudulent,” Samuel V. King, a vice president for EMPLOYERS, said in “11 Warning Signs of Workers’ Compensation Insurance Fraud.”

If an employer suspects fraud, King recommended notifying law enforcement and the insurance carrier and compiling information to support the claim of possible fraud. That supporting information could include identifying misstatements and interviewing witnesses.

Proactive Measures to Prevent Workers’ Compensation Fraud

“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,” Pageler said in the EMPLOYERS report.

The same report said about 24 percent of small business owners have installed surveillance cameras to monitor employees, but this measure may not be enough to prevent workers’ compensation fraud.

EMPLOYERS and others also recommend:

  • Establishing a zero-tolerance policy for fraud and communicating these expectations through written policies.
  • Creating an environment where employees know they will not suffer retaliation for reporting possible workers’ compensation fraud.
  • Promoting a culture of safety by designing and maintaining a safe working environment. A safety plan can help make sure employees understand policies and procedures.
  • Making sure all employees understand the importance of workplace safety and mitigating potential health and safety risks.
  • Holding regular safety meetings and using posters and signs to reinforce policies.
  • Conducting allowable background checks when hiring workers, which could reveal previous possible fraudulent claims.

“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 co-workers, friends or family members, or from workplace surveillance video,” Pageler explained in the EMPLOYERS report.

The same report found one in five business owners feel unprepared or unsure of their ability to identify fraud linked to workers’ compensation. Learning about workplace and occupational safety including occupational health and safety terminology and workers’ compensation fraud indicators can better prepare a manager or supervisor to deal with workers’ compensation issues.

About Eastern Kentucky University’s Bachelor of Science in Occupational Safety Program

Eastern Kentucky University’s online bachelor’s degree in occupational health and safety program is designed to show students how to identify safety risks and potential areas of improvement in construction and manufacturing operations. This degree can help prepare graduates for a position as a safety coordinator or many other occupational health and safety careers.

Industry-experienced safety professionals guide students through occupational safety courses, covering modern trends in employee engagement and the establishment of a safety culture in the workplace. For more information, contact EKU today.

Recommended Reading:

The Economic Aspect of Health and Safety

4 Keys to Avoiding Workplace Accidents

7 Essentials to Risk Identification


Workers’ Compensation and Medical Fraud Prevention Tips: National Insurance Crime Bureau

By the numbers: fraud statistics: Coalition Against Insurance Fraud

More than 1 in 10 Small Businesses are Concerned Their Employees Would Commit Workers’ Compensation Insurance Fraud, Study Finds: Business Wire

11 Warning Signs of Workers’ Compensation Insurance Fraud: CPA Practice Advisor

Five Ways Businesses Can Prevent Workers’ Compensation Claim-Related Fraud: EMPLOYERS