Fraud can find its way into any business and workers compensation claim. There are many types of workers compensation fraud, but they can all cause damage to your business, bottom line, career or work comp rates. Here are the basics you need to know to protect yourself – and your business – from fraud.
What is work comp fraud?
Like other types of fraud, work comp fraud can occur in many ways. The most well-known type of fraud is claim fraud: when an employee makes a fraudulent claim for benefits. However, business owners and even insurance companies can also commit fraud. In a nutshell, fraud is any deception intended to result in personal gain.
Why fraud matters (for everyone)
Work comp fraud affects everyone. Insurance carriers must dedicate resources to investigating and prosecuting fraud. In turn, work comp costs rise across the board, and business owners may see increased premiums. Both of these challenges take resources and attention away from people who are truly injured at work – and that’s who the whole system is built to support.
Types of work comp fraud
We break down the types of work comp fraud by who commits them. Employees, employers and insurance companies can commit fraud. We shared several examples in this blog post.
Employee fraud is most commonly called “claim fraud.” It occurs when an employee knowingly makes a claim for workers compensation benefits that they know they are not entitled to. One example of employee fraud is when an employee suffers an injury on personal time but claims it happened within the scope of employment. Another is when an employee collects temporary disability benefits from a workplace injury but secretly maintains a second job.
Business owners and even fellow employees can spot the warning signs of claim fraud if they know what to look for. Watch for suspicious timing or circumstances, a history of disciplinary action, or talk of a second job. Check the details around the injury. Does it match a pre-existing injury? Could the employee’s hobby cause it? Are they refusing medical treatment? These could indicate a need for further investigation.
Employers can also commit fraud in several ways. One of the most common is when an employer misrepresents an employee’s job classification to try to obtain a lower insurance rate. They may even exclude some employees altogether from the payroll they report to their carrier. In other cases, an employer may make a false statement to an employee to discourage them from making a work comp claim. Another example common in the contracting industry is creating a fraudulent certificate of insurance.
We encourage employees to report suspicious work comp activity by their employer. It might seem risky, but you can report fraud anonymously to your state’s Department of Labor or even your company’s work comp carrier. If you do choose to provide your information, there are laws to protect you from retaliation by your employer.
Even insurance providers can commit fraud. Mishandling claims, failing to pay legitimate claims, charging unapproved rates, and using illegal sales tactics are all examples of fraud on the carrier’s part. Know the warning signs of insurance company fraud to protect your business and your employees.
What to do if you suspect fraud
If you believe you have information that someone is not complying with work comp laws, please report it. You have several options when reporting work comp fraud. You can contact your state’s Department of Labor, your company’s work comp carrier, or even your manager or insurance policy administrator. Often, filing a report with your insurance carrier is the quickest way to get an investigation started. Some even have a dedicated special investigative unit to investigate possible fraud cases.
You can report fraud to Missouri Employers Mutual here.
Prevent work comp fraud
At MEM, we fight hard against fraud – but we’d rather prevent it in the first place. As an employer, you can prevent fraud by screening job applications, encouraging employee reporting, conducting incident investigations, and staying in communication with injured workers. Learn more in this blog post, Prevent Workers Compensation Fraud with These 4 Tips.