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Small Business > Workers' Comp Fraud

Employees pretending to be injured, employers misreporting payroll, and genuinely injured workers extending their benefits after they are better are all forms of workers’ compensation fraud. The National Insurance Crime Bureau estimates that workers’ compensation fraud costs the insurance industry $5 billion per year. These losses then get transferred to the people holding the policies. According to the Insurance Information Institute, 10 cents of every dollar paid in premiums is wasted paying for fraud.

There are three main types of workers’ compensation fraud, and they illustrate that fraud isn’t perpetrated only by employees.

Premium fraud

This is committed by employers who alter their payroll information to lower their premiums, misclassify workers, or lie about prior claims.

Medical provider fraud

This type of fraud is committed by employees or medical providers by billing employers for more than the treatment given, and even billing for workers that don’t exist.

Employee fraud

Making a claim for a non-work related injury, working somewhere else while receiving workers’ compensation, or not returning to work immediately after they are healed are all forms of employee fraud.

Catching fraud cases is not an easy task. For this reason, claims departments view certain situations with suspicion and past experience has shown that they carry a higher likelihood of fraud:

• Accidents occurring early on a Monday morning, soon after a worker arrives at work. This injury may have come from an activity over the weekend.
• Workers claiming to be injured but not willing to go to a doctor or physical therapist could be trying to cover up a fake injury.
• An unhappy employee making a workers’ compensation claim may be trying to get back at the employer or stave off termination.