Published in Cincinnati Business Courier, March 24, 2003

Red flags” can cue firms to workers’ compensation fraud
By Dean Boerger

Workers’ Compensation Fraud & Abuse costs $5 billion per year and is the fastest-growing insurance scam in the nation, according to the National Insurance Crime Bureau (NICB).

-The Monday morning back injury with no witnesses and where the employee is later found working in his yard or working another job.

-The business that misrepresents its categorizing of workers and makes everyone a clerical employee in order to pay a lower risk premium.

These are real-life occurrences, establishing the need for fraud awareness and fraud fighting in the workplace. According to the Insurance Information Institute (III), 10 cents out of each premium dollar is wasted on fraud. These costs not only involve the alleged injured worker but all of those involved in the compensation process.

The mostly familiar form of fraud is the employee who is off work collecting disability compensation when he is discovered working another job. Some malingering employees will attempt to extend the compensation process by complaining of other problems and excuses as to why they cannot return to work. Additionally, employers have been known to classify their employees in low risk categories in order to lower premiums. As well as medical providers billing for treatment and other associated costs that have been exaggerated or even fabricated.

Regardless of who is involved, it is theft from the employer when an employee is involved and from the policyholders when anyone is involved.

Many insurance companies will investigate or have a private agency investigate a suspected fraudulent claim. An injured worker who is disgruntled or is facing a layoff should be more closely scrutinized. It is commonplace to have an increase in injuries when workers are not happy with their employment situation.

The Monday morning injury is always suspect to insurers, as these injuries can be the result of weekend activities such as baseball or working in the yard. The suspect worker will not want to visit the company doctor or nurse. They will refuse rehabilitation and ask to see their own physician, which is their right by law. The worker fraud cases can sometimes be discovered through the company rumor mill.

Fraud committed by an employer is usually more difficult to detect unless they are obviously misclassifying workers but when a large construction company lists (10) ten workers as clerical when in fact they only have (1) one receptionist, can go undetected for years.

The battle against fraud
According to a 1999 Insurance Research Center survey, 35 percent of employees responding said it's "almost always acceptable" to malinger (that is, prolong a claim by feigning illness or injury) when it comes to a workers’ comp. claim. Twenty percent of respondents in the same survey said they were aware of a workers fraud scheme at their workplace. This is often referred to as “soft fraud” and it is a billion dollar business.

Employers should take appropriate measures to inform their workers’ that workers comp fraud and/or abuse will not be tolerated. Have an established workers comp policy and review this with each new worker. Inform them that all cases will be investigated to determine the validity of the claim. Create a reporting system for workers to report fraud and abuse to their employers. Most employees will have no problem cheating the government or insurance companies but will think twice about doing it to their employer.

Tips for combating workers’ comp fraud
* Conduct a complete and thorough background investigation.
* Create a workers compensation policy for all new and current employees, and provide them with updates at least once each year.
* Spread the word that money paid for fraudulent claims comes out of the employer's pocket.
* Educate supervisors on workers comp issues: How injuries decrease productivity and how costs affect the bottom line.
* Display fraud awareness posters and the National Insurance Crime Bureau's fraud hotline number.
* Work with your insurer to implement a safety-management program that can eliminate as many safety problems as possible.
* Be aware of workers comp fraud indicators when a claim is made.
* If you suspect a fraudulent claim based on evidence - contact your insurer and/or an experienced fraud investigator.
* Finally, pay attention to employee complaints and concerns about their working conditions. The strongest predictor of fraud is a chronically disgruntled work force.
(Source: Coalition Against Insurance Fraud)

When fraud or abuse is suspected, consult with a professional investigative agency and legal counsel in order to obtain the necessary evidence to deny or discontinue a fraudulent claim.

Dean Boerger is the CEO/Chief Investigator for Boerger Investigative Services, LLC, a private investigative agency specializing in background investigations, insurance claim, workers’ compensation fraud investigations, and criminal investigations. He can be contacted at 614-298-0026 or email: dean@boergerpi.com. For more information visit www.boergerpi.com.