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Dealing with Workers’ Compensation Fraud

Workers’ compensation is a no-fault method of paying insured workers for wage losses and/or medical expenses due to injuries or illness caused while on the job. A person has committed workers’ compensation fraud when they decide to take advantage of the insurance system for their benefit. Unfortunately, “workers’ compensation claimant fraud and medical fraud are significant contributors to our nation’s annual $30 billion insurance fraud problem.”[1] For example, a type of claim-related fraud is an employee who attempts to collect workers’ compensation benefits by deceitfully stating an injury or illness was caused at work.

Here are some tips and indicators to better help your organization in detecting possible workers’ compensation fraud.

Questionable claims are often identified by one or more of the following:

  • Be wary of injuries that happen late on a Friday afternoon but is not reported until Monday
  • The employee has a pre-existing medical condition similar to that of the alleged injury or illness sustained on-the-job
  • The employee delays reporting without providing a reasonable explanation
  • If the employee’s injury or illness takes place near their need for personal time off
  • There are no witnesses to the accident/injury
  • The employee refuses treatment to confirm the extent of the injury or illness

Perform a proper investigation that encompasses all of the elements in the TIPP mnemonic:

· Thorough; Impartial; Prompt; Preventive

Let employees know that insurance fraud of any kind, including workers’ compensation insurance fraud, will not be tolerated. Additionally, there are penalties and fees for submitting or filing false claims to which the employee would be responsible. To drive these points home, consider adding false claim information in each new hire packet, hang a poster in a conspicuous location to help employees know-how and to whom they can anonymously report potential fraud, and openly communicate about previous stories of fraud convictions to help deter repeat offenses.

In many instances, it is often better to use a third-party, such as a Professional Employer Organization (PEO) or Human Resource Services (HR) and administration provider to manage workers’ compensation and risk management within the organization. The third-party is likely able to perform an unbiased investigation. However, only a court of law can legally determine fraud—not the workers’ compensation administrator or carrier.

Fraudulent workers’ compensation claims can potentially steal millions of dollars from businesses, employees, and their families—when it comes to fraud, everyone ends up paying the price. Contact Harbor America to find out more about dedicated workers’ compensation specialists who are available to help manage your company’s claims. When it comes to workers’ compensation insurance, we know providing superior coverage at an affordable rate is one of the most important aspects to our clients.


[1] National Insurance Crime Bureau: Workers’ Compensation and Medical Fraud