Contractors sign up for Workers’ Compensation insurance to protect employees who are hurt on the job. Although most claims are legitimate, workers compensation fraud is common. Bogus claims can add up to big losses for not only insurance carriers but employers, too.
How Workers Compensation Fraud Happens
Workers compensation fraud can occur at any stage of the claims process. Employers need to be constantly vigilant in order to detect suspicious employee activity.
The most common types of fraud claims are:
- A fabricated injury
- An “accident” that happens on purpose
- The severity of an injury is exaggerated
- A claim for an injury that occurred outside work
- An employee stays out of work longer than necessary
- A current claim for a past injury
What Employers can do to Minimize Fraud
1) Develop Clear Workers’ Comp Policies
As an employer, you will benefit from establishing clear internal policies. Employees need to know how your company plans to address future workers’ comp claims, including information about how they will be investigated and legally pursued.
2) Establish a Culture of Safety
If you work hard at building a safe work environment, it will be contagious to the rest of your team. You can start by developing a safety plan. Then, let everyone know about your policies and procedures. Next, hold regular safety meetings. Finally, reward employees for meeting safety goals. These steps will decrease the chances of injuries and, ultimately, workers comp claims.
3) Conduct Investigations of Claims
Even though the claims process is handled by insurance companies, it’s important for employers to conduct their own investigations. Not only will it reduce the chances of fraud, it could lead to new company procedures that limit future injuries.
The Red Flags of a Phony Claim
- Contradicting employee stories
- Injuries that are inconsistent with the accident
- No witnesses
4) Create Sound Hiring Procedures
The quality of your workforce is another factor in reducing fraudulent claims. A thorough screening process often produces a more reputable workforce who are less likely to defraud their employer.
When interviewing employees, recognize these red flags:
- Spotty work record
- Criminal record
5) Consider Video Surveillance
A nearly foolproof way to protect your contracting company from false claims is to have video evidence of the incident. If you set up cameras in key spots around the job site, you will be able to better protect yourself against fraud.
If you are suspicious of Workers Compensation fraud, you should report it immediately to your insurance carrier’s claims department, or to the appropriate law enforcement authorities.