When you think of workers compensation fraud, you might think about an employee faking an injury to receive benefits. This scenario does happen – it’s called claim fraud – but it’s just one of many examples of workers compensation fraud.
Why you should care about fraud
Work comp fraud is not a victimless crime. It affects everyone from business owners to insurance providers to people truly injured at work. When people commit any type of fraud within the work comp system, it takes resources to investigate the details. Fraud and fraud investigations often direct money or other insurance benefits where they don’t belong. This can increase costs across the industry, impacting policyholder premiums. Worst of all, it can cast a shadow of doubt or suspicion on a system designed to protect businesses and support injured workers.
Examples of workers compensation fraud
Fraud comes in many shapes and sizes. The most recognizable type is claim fraud, but there are also company fraud and carrier fraud. Here are some common examples of workers compensation fraud.
This is a classic example of work comp claim fraud. A “Weekend Warrior” experiences an injury in their personal time but claims it happened within the scope of their employment. You might spot a Weekend Warrior reporting a shoulder injury on Monday morning after a Saturday game of recreational softball. To validate the details of any workplace injury, always complete a thorough incident investigation. Ask plenty of questions as soon as the report comes in. Speak to any witnesses who were present. Document all the details in the report and keep an eye out for any changes to the story.
Another form of work comp claim fraud occurs when a worker is injured on the job and continues to work despite physician-mandated work restrictions. This means the worker collects temporary disability benefits while also earning a paycheck. Typically, this paycheck comes from outside the organization filing the work comp claim. Perhaps they already had a second job, or maybe their work restrictions freed up the time to get one.
This type of fraud is harmful in many ways. The first, and most obvious, is a doctor directed the person not to work in their condition! The worker could overexert and end up making their initial injury even worse. It’s likely they’re also lying to their physician about their activity levels, making a successful recovery nearly impossible.
This scenario also drains resources from the work comp carrier and the Social Security disability fund. These resources are directed away from individuals who truly need them to support themselves and their families.
The best way to watch for this type of claim fraud is to have a structured return to work program. If an employee is injured at work, it’s the business owner’s job to ensure they have the best recovery possible. Stay engaged throughout the process. Get reports after every doctor visit and be aware of the employee’s work restrictions. An early return to work is associated with better claim outcomes for everyone, including a better recovery for the employee. Check in on them regularly and keep them engaged with what’s happening in the workplace. If they can’t perform their normal job with the restrictions set by the doctor, consider light duty options.
Fraudulent certificates of insurance
A certificate of insurance (COI) is a document that proves a business has insurance – in this case, a work comp policy. If you hire subcontractors on a regular basis, you’re likely familiar with requesting and documenting COIs for your subcontractors. Do not miss this crucial step in the contracting process! If someone is injured on your job site and they (or their employer) don’t have a valid work comp policy, they could be considered your employee for work comp purposes – even if they’re technically an independent contractor.
When working with subcontractors, do your due diligence before they begin work. Request a copy of their COI, and then verify it with the insurance carrier or agent. Have the policy number ready when you call and ask whether the policy still has valid coverage. If the response is no, you’ll know right away the COI has been faked by the subcontractor, a type of company fraud.
For some businesses, especially those who rarely experience claims, work comp premiums can seem like an expense that never sees a return. However, it’s important to know what coverage you need and always operate within those laws. Premium evasion, another type of company fraud, occurs when a business excludes some workers from the payroll reported to their work comp carrier. They may pay these workers in cash to avoid a paper trail.
If work comp seems like an unnecessary expense, remember a single severe workplace injury can devastate a small business that isn’t prepared. It’s better to have the coverage and never need it than to have someone injured on the job, not be able to support them and be legally responsible for expenses.
If you’re experiencing few or no claims, that’s great! It likely means you’re enforcing safety policies and encouraging a safety culture. Your work comp insurance carrier should be rewarding you for your safety results with programs that deliver a true return on safety.
Help us fight fraud
Your work comp carrier should have a special investigative unit to investigate possible fraud cases. Often, the only way investigators find out about suspicious activity is because a business owner or employee reported it. Be alert and report suspected fraud if you notice details that just don’t add up. You can report suspected fraud anonymously, but if you’re comfortable, you should leave your contact information for follow up.
It’s important to remember that most work comp claims are valid. Insurance carriers, business owners and lawmakers all want the same thing: to provide benefits and support to injured workers and their families. When people try to game the system, it hinders this goal. Ask your work comp provider how they’re fighting fraud to support workers and keep your premium down.