According to the National Insurance Crime Bureau, fraudulent claims in worker’s compensation may amount to $80 billion annually in the USA. While some large-scale businesses may have additional resources to tackle such situations, small businesses risk major financial losses in the battle against fraud.
Employee fraud tends to make up for about 20% of the annual worker’s comp frauds in the form of alleged accidents or exaggeration of injuries. Although 95% of accidents at the worksite that lead to compensation claims are real, staged accidents comprise the remaining 5%, creating an excessive financial burden on the company.
Sadly, in the wake of the pandemic, the chances of fraud increased by leaps and bounds. Cases emerged of workers claiming to have contracted COVID-19 while working to extort the medical expenses from their employers. The pandemic is a sensitive issue, so many small employers may not even go into all the verification and scrutiny, thus accepting their claims as real. Such incidents have increased in the last few months, especially in the healthcare and industrial sectors, where real cases have become more common.
Are you worried about your business facing such fraud? While obviously, the overwhelming majority of claims are real, it’s always good to be prepared for the outliers. The following red flags may help you identify fraudulent claims.
A long history of claims
While hiring an employee, it is best to research his/her worker’s compensation records over the years. Such records may not be easily available to a potential employer, but if available, you must seek the truth. If you notice that the worker has a long history of several compensation claims, citing illnesses or injuries, it may point to a pattern that deserves extra care.
Financially challenged employees may try to use the worker’s compensation benefits to their advantage. While it is definitely not recommended to reject candidates based on their financial backgrounds, it’s something to take into consideration if a claim should arise.
No witness to the claim
In most workplaces, an accidental injury or similar incidents will have witnesses to back the claim. If there is no witness to a worker’s claim for compensation regarding an injury or sickness, it may be worth challenging it. Install cameras at the worksite to record such incidents so that you can challenge the claim in court with valid evidence. Of course, the cameras will also help the workers who have a genuine cause for claims in case of accidents without witnesses.
Time of the claims
If any worker claims compensation for an injury or sickness after being terminated by the employer, or at the end of the contract, you should look into the situation extra carefully. Such claims should be scrutinized and verified with proper evidence to identify any chances of fraud. Records suggest that a disproportionately large segment of frauds arise in such circumstances.
Can insurance help in such situations?
Now, even if you cannot nail down a fraudulent claim or prove it, you do have only one option – contact your insurer. They can appoint someone to look into each case carefully and settle claims found genuine. The insurer can also contest a seemingly fraudulent claim. If the claim is genuine, the insurance will help you pay for the medical and other expenses without eating into your cash flow.
The fact is that even a single worker’s compensation claim can break the financial backbone of a small company. As the small company owners may not have the experience to deal with such situations, the insurance acts as a cushion for them. Even if the claim turns out to be genuine, they do not have to pay for it by breaking their banks.
Consider the worker’s compensation premium as a monthly security investment that will help you in adverse situations and reduce your fears about being brought down by fraudulent claims. Don’t you install cameras and smoke alarms on your business premises? Well, the worker’s compensation insurance is similar.
Some other ways you can minimize the chances of worker’s compensation claims are as follows:
- Develop safety management programs – Take worker’s safety up a notch by offering documented Visible Operating Procedures (VOPs). You should also train workers to safely address tasks that could lead to injures or worse.
- Join hands with medical assistance providers – Secure alliances with medical services providers to meet emergencies with timely medical assistance. It will reduce the chances of grave accidental injuries or sicknesses.
- ZERO-tolerance for fraudsters – Create a zero-tolerance policy by consulting your insurer and make it clear to every employee that no fraud will be tolerated in your business premises. Anyone found liable for the same can be sued in court.
Keep your insurer in the loop always and update them regularly about such incidents. Seek their help to contest any claim that does not seem genuine. If your employees are aware of the consequences of fraud, they will shy away from it. The aim is to protect your workers but it is also to protect your business.