Workers compensation claims can bankrupt a company. I remember it nearly happening to an old acquaintance of mine. He ran a mid-size accounting firm that was very successful. Then, one of his employees slipped on the stairs and applied for workers’ comp. The company was going to have to pay out a major settlement, which likely would have made his premiums unaffordable. Had the case gone through, he would have gone out of business. Then, they found out that the entire case was fraudulent. Luckily, they caught it in time and the owner was able to recover, but it still cost him and his insurance company.
Even though no money was paid to the employee who faked the case, the insurance company lost money because they had to defend the case and prove their side. The accounting firm lost money because of the additional time and resources that had to go toward fighting the suit. Even though the ending was a good one, ideally they could have caught that claim earlier. They may have caught it as it was being filed if a better triaging process had been involved.
The Workers’ Compensation Investigation
Insurance companies investigate most workers’ compensation cases, though some of these cases get a longer look than others. The insurance companies know from past claims which ones are higher risk and which ones present the lowest risk of fraud. As a triaging step, higher risk cases will be assigned to more experienced investigators, while ones that do not pose a threat can be filed away. Generally, insurance companies break their comp cases down to four different types.
- Report only – The employee suffered an injury but did not receive medical treatment, or only received onsite first aid. The report is filed for compliance and record keeping purposes only and no investigation is done as there is no fraud risk.
- Medical only – The employee was injured and was sent for medical treatment; however, the injury was minor and the claim is being filed for the payment of medical bills. An investigation will likely only be done if the case results in ongoing medical bills or if the injured worker makes a claim for lost wages. The risk of fraud in medical only cases is typically very low.
- Indemnity – In this instance, the worker has ongoing medical care and a medical condition that makes them unable to perform the duties of their job. They’re making a claim for lost wages as well as medical treatment. This is the category of workers’ compensation which receives the most “soft” fraud. In soft fraud cases, the worker might prolong their medical treatment to spend more time off work. The case isn’t fraudulent to begin with, but becomes fraudulent over time.
- Catastrophic – A catastrophic case is one that’s expected to be both very expensive and permanently disabling. This can be obvious, like with a truck driver being paralyzed in an accident, but usually they’re claims that grow over time. In some instances, a catastrophic claim starts as a neck sprain which turns into the need for an expensive surgery and permanent disability. When there’s fraud in these cases, it’s usually “hard” fraud, designed to gain an outright settlement.
The more expensive a case, the deeper the investigation it requires. But there’s a problem here—By the time a company realizes that fraud is being committed, it’s almost always too late to mitigate the damage. They learn when the case is already in the courtroom. But many of these cases don’t start out severe. A clever scammer isn’t going to stage a massive accident. They’re going to report a neck injury as a medical only claim, and then slowly up the stakes until they’re demanding payment for a major surgery. Catching fraud cases before they reach this stage can help reduce their cost.
Better Triaging for Lower Costs
While in most cases, it’s the employer who files the first report of injury, insurance companies do have policies of taking statements from injured workers, except when the case is minor. These interviews can be a good indication of how serious the case is going to be, which is why it’s important to take as many as possible. But it’s not possible to take them on every single case. Instead, a simple triaging system can be put in place to identify cases that might be costlier or potentially fraudulent. Some red flags for this include:
- The individual has a history of claims – If this is the second or third report of injury for someone who doesn’t work in a physically strenuous occupation, this is something that should be investigated thoroughly.
- The accident details don’t make sense – If an employee is reporting that a very minor incident caused an injury, there’s fraud potential.
- There’s a recent warning or reprimand in the employee’s file – Some clever employees will use a workplace injury to protect their job. As it’s illegal to fire someone for reporting a workplace injury, often these individuals hope that the workplace claim will muddy the waters and stave off any performance-related actions.
- The individual gives a false statement or refuses to give one at all – Insurance companies have the right to investigate claims, so refusal to give a statement is grounds for denial. With the statement, you may want to go the extra mile and have them verify the events via Remote Risk Assessment. This way, their response can be measured for potential risk. Those individuals that come back as high risk can be investigated more thoroughly.
These red flags give a good indication that you could be dealing with a fraud case. Stay on top of it from the beginning. Get statements early and, if possible, verify them with Remote Risk Assessment (RRA). AC Global Risk offers RRA technology for use in many industries, including insurance. It can be used in any language, and set up in even the most remote locations. It’s a good way to economically manage risk in your organization. For more information, contact us today.
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