What Should Business Owners Know About Workers Compensation Fraud?


According to data from the National Insurance Crime Bureau, workers compensation fraud costs American employers, consumers, shareholders, and employees around $7.2 billion a year. This is a staggering amount of money, and it can cause business owners to take notice.

Along with the importance of hiring an insurance investigator who can help you identify suspected workers; compensation fraud, what else should business owners and employers know?

The following is an overview of what to know about current trends, things to watch for, and other background information related to workers compensation fraud.

Types of Fraud

There are three types of workers’ compensation fraud. These are employer fraud, vendor fraud, and employee fraud. Employee fraud is the most commonly discussed, and it accounts for about 20% of annual workers’ compensation claims.

While workers’ compensation fraud of any type can and does occur, it’s important for business owners to know that it is still rare, and 95% of all claims do involve real workplace accidents. However, of those accidents that are real and do occur at work, fraud can still happen. For example, while someone might be injured at work, they may continue to claim benefits for much longer than what they need, and they may claim they aren’t able to return to work for much longer than is the reality.

Another example of fraud occurs when an employee works somewhere else but is still receiving workers’ compensation benefits.

Who Pays for Workers’ Compensation Fraud?

Of those $7.2 billion in annual costs, who’s shouldering the burden? Research shows pretty much everyone. When an employee makes a claim, the company they work for,which is you as the employer will have to pay for it with an increase in workers’ compensation insurance premiums. That’s not where it ends, though.

Other employees in your business as paying well because they are often pulling the weight of the employee who isn’t there. As an employer, when you have someone out, you may be less likely to give raises as well because you can’t afford it. Consumers can pay because of higher costs to deliver products or services as well.

What Are the Signs of Workers’ Compensation Fraud?

If you spot the red flags of fraud, you can contact an insurance investigator who can help you with things like surveillance, locating witnesses, investigations at the scene, and more but you still need to be able to proactively see the warning signs to know that you should bring in a professional investigator.

Some possible warning signs of fraud include:

  • The employee is supposedly injured on Friday afternoon but doesn’t report it until Monday, or is injured Monday morning first thing.
  • There are no witnesses.
  • Based on the employees’ description of the accident, it would seem illogical that it could occur.
  • An employee works with health care providers or lawyers with a history of suspicious claims. For example, sometimes claimants will turn to the same pool of doctors and lawyers.
  • The accident occurs right before an employee is fired or right after, or perhaps when seasonal work is drawing to an end, or a project is ending.
  • The claims adjustor isn’t able to reach the claimant while they’re at home during the day or doctors appointments are frequently missed (this could indicate the claimant is working somewhere else while receiving benefits)
  • Treatment seems to be excessive or ongoing for what appear to be minor injuries
  • Medical bills and documents are copies rather than originals
  • The claimant visited several doctors (doctor shopping for an opinion that would be favorable to them)
  • You first learn about the claim because your employee has hired a lawyer immediately after filing the claim
  • There is any delay in the reporting of an injury
  • An employee has seemed unhappy or had problems at work before the injury

Preventing Workers’ Compensation Fraud

Along with looking at possible red flags that could indicate fraud is occurring, as an employer, you can also take steps to prevent this type of fraud. Some of the prevention tips you can put in place include:

  • Work on cultivating a positive corporate culture because happy employees are less likely to commit fraud
  • Do thorough background checks before you hire new employees
  • Focus on employee safety including safety plans and thorough training of employees
  • Create a specific set of steps for employees to follow if an accident occurs and also make sure supervisors are well-trained on how to handle workplace accidents

Workers’ compensation fraud is an unfortunate part of doing business for some companies. It’s important to know what to look for as an employer to lower the risk that it will happen in your business.