Worker's Compensation Fraud

Workers' compensation fraud occurs when individuals withhold or provide false information about a workers' comp claim. In 2000, the National Crime Insurance Bureau estimated that workers' compensation scams were the fastest growing type of insurance fraud in the United States (California Department of Insurance, n.d.).

Signs of Workers' Compensation Fraud

Workers' comp insurance fraud may be hard to detect. Here are some signs that a workers' compensation claim may be bogus:

• Conflicting descriptions of the accident exist.
• Evidence exists that the injured employee is continuing to work on the side, despite his injury.
• It is difficult to contact the injured employee at home.
• No one witnessed the injury or accident.
• The employee failed to report the injury in a timely fashion.
• The injured employee refuses to submit to a medical evaluation to determine extent of the injury.
• The injury occurs before a proposed strike, anticipated layoff or an employee's scheduled retirement.

Even if you see one or more of these signs, it doesn't necessarily indicate a workers' comp claim is illegitimate. It might, however, be cause for further investigation.

Not all workers' compensation fraud is perpetrated by employees. Medical professionals may try to defraud a workers' comp insurance company by requesting reimbursement for medical procedures that were never performed, or by charging an inflated rate for those procedures. Employers can also engage in workers' compensation fraud by, for example, underreporting the number of employees or misclassifying job functions to obtain a lower premium from workers' compensation insurance companies for small business.

If You Suspect Workers' Compensation Fraud

The vast majority of workers' compensation claims are legitimate. A University of Michigan study found that only 1 to 2 percent of claims were fraudulent (PBS Frontline, n.d.). However, if you believe that you're dealing with a fraudulent claim, you can take action. You can contact your workers' comp insurance company, or file a complaint with your state's workers' compensation bureau or Department of Insurance.

Preventing fraud before it starts is the best approach. You can do this by:

• Being careful when hiring staff (for example, consider conducting criminal background checks, pre-employment physicals and random drug tests)
• Investigating accidents thoroughly when they take place
• Making sure that employees understand workers' compensation policies.