Fraud surrounding worker’s compensation claims is a serious issue. While worker’s comp insurance benefits are intended to protect the employee and the employer, individuals are still willing to break the law to achieve more for themselves. Fraudulent claims empty the pockets of business owners, employees, and customers yearly, and the economy feels the effects of these billion-dollar lawsuits.
While lying about a work injury or the severity of it is risky, those inclined to take such risks do so on the notion that they can get away with it. You can’t always gather enough proof to verify that a workplace injury is not present, severe, or causing problems. Likewise, when fraudulent activity extends beyond the workers and is left in the hands of authority figures, such as an insurance agent’s underreporting, the evidence of fraud is even harder to identify.
Understanding the risks at stake can give employers the means to protect themselves preemptively and to inform their team of the costs of engaging in fraudulent activity. This article covers the most common examples of workers comp fraud and what you can do as a business owner to protect yourself and your company from these false claims.
Read on for a guide on avoiding workers comp fraud at your place of business, or you can see more at https://www.employers.com/blog/2018/4-ways-to-combat-workers-compensation-fraud/.
Avoiding Workers Comp Fraud: Two Types Of Fraud
There are two general ways workers comp fraud is classified: claim-related and policy-related fraud. Below, we offer a brief description and examples to help you determine whether they may be taking place at your business.
What Is Claim-related Fraud?
Claim-related fraud results from an employee falsely claiming a work injury or exaggerating the injury to obtain insurance benefits. This may include staging an injury for workers comp benefits.
What Is Policy-Related fraud?
Policy-related fraud results from a policyholder or an insurance agent’s decision to falsely report (by underreporting) a company’s payroll or incorrectly classify employees so they can receive insurance for less money.
Regardless of the type of workers comp fraud, the business owner is negatively affected. When fraud-based claims are made, business owners face higher insurance premiums and unnecessary scrutiny surrounding previous claims.
As a business owner, you want to do everything possible to prevent fraudulent claims and behavior from occurring at your workplace. In addition to familiarizing yourself with the two types of fraud related to workers comp insurance, here are some additional steps you should take to protect yourself and your business.
Enforce A Zero-Tolerance Fraud Policy
As the business leader, it is your job to be as clear and upfront as possible to ensure that you are protecting your business as best as possible. As part of your initial company orientation, each employee should receive a document outlining workplace expectations, including a zero-tolerance policy toward fraud.
By stating in writing that anti-fraud policies are in full effect, you may prevent these claims from taking place at your company, as the policy may discourage anyone inclined to act on fraudulent behavior. You may create written contracts that outline termination of employment should false claims be proven as an additional method to deter workers from fraudulent behaviors.
Keep Accurate Employee Records
Take your time collecting information on your employees when they join your team. Refrain from accidentally mislabeling a worker with the wrong job title that does not meet their job description. For example, assigning high-risk work to “dock workers” creates room for debate. By title, a dock worker is only exposed to low-risk jobs, suggesting that high-risk work is not permitted for these individuals.
When these mistakes are made, assessing workers’ comp insurance premiums is more challenging to quote and makes it more difficult to define what employees are entitled to based on their job titles. It is wise to have employees fill out their identification paperwork that outlines their job titles in writing so that it can be referred to and verified by employees.
Regularly verifying that this information is correct can help protect your business against fraudulent activity, should an attempt to claim more under a misleading job title occur.
Hire Only Those You Can Trust
Avoid falling into the trap of hiring untrustworthy people. By employing only those you feel confident will work with integrity, you can avoid the likelihood of workers comp fraud. Take your time during the hiring process, and background check everyone to ensure they can truly be trusted. Ask for references and offer a trial work period before their job is secured.
It is essential to look at how potential employees present on paper and to get a feel for their character in person. Create a list of interview questions that will further guide your decision on whether or not to hire someone. Gauging honesty, integrity, and other values that reflect the kind of worker you need on your team will require your judgment and interview questions that give candidates a chance to explain what they’re all about.
Give Employees Clear Methods To Report Fraud
To enforce a positive workplace with a zero-tolerance policy on workers comp fraud, create an open dialogue with your team on how they can report fraudulent behavior. By making this process easy, those inclined to act unlawfully will be less comfortable doing so, as they’ll understand that everyone on the team can take legitimate action to report it. All of these steps reduce the likelihood of fraudulent activity by employees.
Get The Coverage You Need To Protect Your Business
Ensure that the coverage you select for workers comp insurance operates under policies you can count on. You want a team supporting you if and when fraudulent workers comp claims occur.
Teach Your Team What They Need To Know To Protect Your Business
Proving fraudulent workers comp claims becomes less challenging when you have the protocols to prevent these occurrences. Get a solid insurance coverage plan you can rely on, teach your team what they need to know to report fraudulent activity and help them understand that false claims are grounds for termination.
Nina Smith 
Rhydian Choi