How Businesses Can Protect Against Workers’ Comp Fraud

Workers’ compensation fraud is a serious problem. Surveys show that 1-in-10, or 10%, of small business owners are concerned that workers will file fraudulent workers’ compensation claims. The concern is enough for 25% of owners to install surveillance cameras to monitor employees on the job.

And an even bigger concern is that 20% of owners are not sure how to identify potential workers’ compensation fraud.

Potential Red Flags of Fraud

There are usually a few red flags that help employers pinpoint potential fraudulent claims. The red flags that all employers should know about include:

  • The employee has a history of making workers’ comp claims.
  • There were no witnesses to the incident.
  • The employee failed to report the incident in a timely manner.
  • There was a recent change in employment status.

Employees must also be concerned about businesses that misclassify their employees. It’s illegal to misclassify employees in an effort to avoid paying full compensation premiums. These schemes involve misclassifying an employee as an independent contractor.

Paying employees off of the books can also lead to the company not having to pay the full, legally-required premiums that protect workers who get injured on-the-job.

Keep in mind that actual fraudulent claim rates have decreased since 1993 when fraud was at 2.17%.

“In 1998, it dropped to 1.35 percent. Additionally, over the same period, workers’ benefits dropped by 35 percent while workers’ compensation costs on companies decreased by 38 percent,” claims Storm & Associates.

Businesses can, and should, do everything in their power to avoid fraud.

1. Investigate Every Claim

Small business owners need to adopt the same mindset of large business owners: investigate every claim. Claims always need to be investigated quickly. The longer a business waits to investigate a claim, the harder it will be to verify the validity of a claim.

Businesses can:

  • Hire investigations
  • Question employees present at the time of the incident
  • Review any surveillance video that may exist

Investigators may find that an employee, claiming a severe injury, is living a normal life. This is when the installation and use of surveillance cameras can save businesses a lot of money. Video evidence that an injury never occurred can put a quick end to a fraudulent claim.

Gather the facts, talk to your insurance agent, and make sure that any claim that comes across your desk is a valid one.

2. Report Injuries Immediately

Businesses have a duty to their employees. When an injury claim is filed, it’s important that the injury is brought to the attention of an insurance agent promptly. Fraud harms businesses and not the insurance company.

Businesses will be responsible for paying out-of-pocket during a claim.

Even in the event that an insurance company fronts the money in advance, this means that the Experience Modification Factor will rise. What this means is that you’ll be charged a premium for three years.

Reporting injuries promptly will allow the insurance company to investigate a claim and keep money in the pocket of a business.

3. Train Key Employees on Handling Injuries

Key employees, these are your supervisors or managers, need to be trained on how to handle injuries in the workplace. These individuals need to be the contact for employees following an injury.

These individuals know the workplace better than anyone else.

Supervisors should attend the employee to the medical facility. They will also be responsible for:

  • Contacting the employee afterward to express their concern
  • Contacting employees to let them know they’re missed in the workplace

A trained employee that shows that a company cares for their employees may mean the difference between the worker filing a lawsuit against the company or not.

Businesses also have a duty to keep their employees safe at all times. Workers’ compensation is in place to protect businesses and their employees. When a claim is made, it’s important for the business to investigate the claim and make changes to avoid future injuries.

If a business can improve safety, train employees or make key changes to avoid future injuries, this is the best way to reduce fraudulent claims.

A safe business is a business that suffers from fewer workers’ compensation claims. Avoiding even one fraudulent claim will be worth the investment made by the business. Background and pre-employment checks can also help reduce the risk of fraudulent claims.