Fraud is commonly defined as an intentional act designed to deceive another resulting in a gain that otherwise may not be obtained. Workers compensation insurance just happens to be one of the most singled out lines of insurance products susceptible to unscrupulous folks looking to take advantage in order to secure some type of personal gain or advantage. Let’s discover the who what when and why about workers compensation fraud.
Who commits workers compensation fraud? Let’s start with a list of common players:
- Employers – They buy workers comp policies to provide coverage for injured workers.
- Employees or workers – They get injured on the job triggering the claim process.
- Insurance Companies – They sell their workers comp product and provide claim payments.
- Insurance Agents – They sell the policies for insurance companies.
- Service Providers – These are the medical organizations and doctors who provide services to injured workers.
There’s not one group that’s cornered the market on committing workers compensation fraud. This topic crosses all borders and just about anybody who has anything to do with the workers compensation process of buying, selling, underwriting, issuing and servicing a workers compensation policy can commit a fraudulent act.
What do they do to create a fraud?
- Intentionally provide false information about processes performed by their workforce.
- Falsify payroll records.
- Intentionally provide false information about executive officers and others who may elect inclusion or exclusion from coverage.
- Intentionally provide false information about where and in what states their workers perform operations.
- Falsify employment records.
An unscrupulous employer will often provide well orchestrated, false information, with the intent to manipulate the system for a lower cost.
- Employees or worker:
- Filing a false claim.
- Taking advantage of the employers workers compensation policy to provide coverage for a non-work related injury.
- Inflating the injury of a legitimate claim.
The news is full of workers who’ve been discovered, through investigation, that while they were off work, with activity restrictions imposed on them by their medical provider, who held other jobs or went on extended hunting trips or water skiing. You’ve seen those videos. And don’t forget the worker who looks at being off work for recovery as a vacation. Who takes advantage of the process and who through their individual actions often times extend their recovery time.
- Insurance Companies:
- Organizations that pose as legitimate insurance carriers only to discover later that they are fake.
- Improper claim handling including deliberate delays in processing claims and deliberate improper payments.
- Failure to properly investigate submitted claims.
- Denying legitimate claims.
- Improperly cancelling policies.
- Charging inflated unfiled rates.
- And other actions imposed on consumers without proper state filings in place.
It’s true! Insurance carriers also commit fraud by their actions on how claims are handled, how they treat policyholders and other actions commonly known as “bad faith.”
- Insurance Agents:
- Misappropriation of policyholders premium. (Stealing the employers premium.)
- Selling an employer a policy through a fake insurance company.
- Intentionally misrepresenting an employers operations to secure a cheaper premium.
All of the insurance agents I personally know in this industry are hard working, dedicated people that strive to do the right thing for their clients. They put everything into providing top notch quality products for their clients and do the right thing! But it cannot be denied that there are bad apples out there who want nothing more than to enrich themselves at the expense of their clients. So be sure to work with qualified insurance agents when securing a workers compensation policy!
- Service Providers (doctors, medical personnel and facilities):
- Providing false medical reports.
- Billing for services not provided.
- Extending medical treatment time for legitimate injuries.
- Colluding with workers to bilk the insurance company.
Pick up any news paper or go online and read the news. You’re sure to soon come across an article about some doctor somewhere who duped the insurance company out of an untold amount of money by faking up injury exams. Who overbilled the insurance company for services not provided and who otherwise lined their pockets by scamming the insurance company and often time the injured worker alike.
When are most workers compensation frauds committed?
- When the original policy is set up.
- When site inspections are conducted.
- When a worker is injured.
- When the premium audit is conducted.
- When a worker visits a service provider.
- Just to name a few…
Workers compensation fraud is an opportunistic issue. When a policy is first set up an employer seeking to better their position may provide false information to the agent who uses that information at face value to establish the class codes and rate the policy. Unknowingly providing the employer with a cheaper premium for the actual exposure. An injured worker may visit a service provider who provides an intentionally inflated injury to the insurance company. Opportunity and unsuspecting innocents create the environment where workers compensation fraud can thrive.
Why are workers compensation frauds committed?
Ok, I’ll admit, this may be the most simple and most obvious reason. But money and how it plays into the mix can never be underestimated.
Employers who commit fraud do so with the single purpose of gaining some sort of advantage by working the system. They are usually looking for a cheaper premium by conscientiously manipulating the classification code system or by hiding rating payroll or remuneration. Workers who fake or inflate injuries and recovery costs look to take advantage of a system that frankly often doesn’t work very well and unknowingly allows these actions to take place.
Insurance companies and insurance agents and service providers are certainly not above taking advantage of the consumer. Departments of Insurance and the Attorney Generals Office, found within each state, are tasked with providing oversight and consumer protection from these types of situations. Individual state legislatures have enacted “bad faith” statutes to further protect consumers from direct actions committed by insurance carriers.
Now for the good news! Out of all the years we’ve been providing help to consumers, insurance agents, insurance carriers and expert witness services, within our areas of expertise, we rarely come across what appears to be a conscientious fraudlent act. What we see day in day out are common errors and mistakes made by ligitimate misintrepretation and application of workers compensation rules, classification codes, experience rating rules, calculations and claim impact on premium.
Hope this helps you out and thanks for reading!