Workers' Compensation Webcast: Fighting Fraudulent Workers’ Compensation Claims
Thorough claims investigations, vigilant monitoring of potential fraud indicators, and positive relationships with injured employees can help employers reduce the impact of workers’ compensation fraud, according to panelists on a webcast sponsored by Marsh’s Workers’ Compensation Center of Excellence (COE).
About one-quarter of all property/casualty insurance fraud occurs in state workers’ compensation systems, costing employers and others more than $7 billion annually, according to the National Insurance Crime Bureau (NICB). Claimant fraud is estimated to represent one-fifth of all workers’ compensation claims paid, and workers’ compensation fraud is the fastest growing segment of insurance fraud in the US, according to the NICB. Beyond those direct financial costs, fraud can also undermine morale and be unfair to workers with legitimate claims and other workers who need to make up for the absence of employees who file false claims.
Fraud can manifest in several ways and come from several sources, said Jill Treadwell, a fraud prevention specialist at Travelers. In a soft fraud case, for example, an employee might exaggerate symptoms from a legitimate injury in order to remain off work or on modified duty for a longer period of time. An example of hard fraud, meanwhile, would be an employee attempting to receive benefits for a non-work-related injury or collecting benefits from one employer while working elsewhere. Fraud can also be committed by medical providers, typically in the form of questionable billing.
Because most workers’ compensation claims are legitimate — and fraud may not be immediately apparent — every claim should be thoroughly investigated using a variety of tools, said Dennis Tierney, director of claims in Marsh’s Workers’ Compensation Center of Excellence. “It’s impossible for an employer to know if every claim is legitimate. So claims professionals at third-party administrators and insurers need to complete investigations on every claim and determine if it’s compensable.”
Still, employers and their claims advisors should look for “red flags” that could indicate fraud in workers’ compensation claims. These include:
- Employees who are disgruntled or facing disciplinary actions.
- Employees with unexplained absences prior to filing claims.
- Employees who are new to their jobs.
- Employee with a history of filing claims.
- Injuries that are reported late or are unwitnessed.
- Claims that are subjective, with no specific diagnosis.
Although all claims should be investigated, employers should avoid making the investigative process unnecessarily adversarial. “The message you want to convey to injured workers, first and foremost, is that you’re concerned about their injury,” Treadwell said. You want to make clear that your number one goal is safety and make that person feel cared for, respected, and secure.”
Beyond effectively investigating all claims, employers can also help to deter fraud by adopting an employee-centric approach to workers’ compensation claims. A claims advocacy approach focused on communication, education, and transparency, can foster more positive relationships between employees and injured employees. “If you can establish trust between your organization and your employees, it’s going to make them less inclined to commit fraud,” said Cindy Pelaquin, director of risk management and insurance at BJ’s Wholesale Club.