11 Warning Signs an Employee is Committing Workers’ Compensation Insurance Fraud
Updated: Feb 28
According to CPA Practice Advisor, workplace injury and illness risks differ depending on the company and industry. While accounting firms aren’t usually exposed to extreme workplace hazards, common employee injuries such as slips, trips and falls, back injuries and repetitive stress injuries sometimes occur. Any time an employee gets hurt, there is the potential for workers’ compensation insurance fraud to occur.
Using statistics from the National Insurance Crime Bureau, CPA Practice Advisor stated that workers’ compensation insurance fraud costs businesses about $30 billion annually. One common type of fraud is claim-related fraud, which is when an employee attempts to gain a workers’ compensation insurance benefit by falsely stating an injury or illness occurred at work or by exaggerating an existing injury or illness. Committing this type of fraud may lead to higher insurance premiums for employers and may ultimately hurt workers who are legitimately injured on the job.
Fraud Warning Signs
While there is no exact science to identifying claim-related workers’ compensation fraud, CPA Practice Advisor argued there are several “red flags” accounting firm owners should be aware of:
Monday morning injury reports
The alleged injury occurs first thing on Monday morning, or the injury occurs late on Friday afternoon but is not reported until Monday.
The reported accident occurs immediately before or after a job termination, layoff, end of a big project or the conclusion of seasonal work.
An employee’s medical providers or legal consultants have a history of handling suspicious claims, or groups of claimants use the same doctors and lawyers.
There are no witnesses to the accident and the employee’s own description does not logically support the injury’s cause.
The employee’s description of the accident conflicts with the medical history or injury report.
History of claims
The claimant has a history of making suspicious claims.
Treatment is refused
The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury.
The employee delays reporting the claim without a reasonable explanation.
Claimant is hard to reach
The allegedly disabled claimant is hard to reach at home.
The claimant has a history of frequently changing physicians, addresses or jobs.
Experience shows that when two or more “red flags” are present in a workers’ compensation claim, there is a chance the claim may be fraudulent. Keep in mind, these are simply indicators. Many perfectly legitimate claims are filed directly before or after an employment change and some claimants may be hard to reach at home.
If an employer suspects an employee may be committing claim-related fraud, CPA Practice Advisor suggested reporting the suspicious behavior to their workers’ compensation insurance carrier immediately. The appropriate law enforcement authorities may investigate. After notifying your carrier, compile as much information as possible to support the claim.
This might include identifying misstatements and witnesses.
Accounting firm owners can proactively reduce the potential for false claims. One way is to establish a zero-tolerance policy on fraud and clearly communicating these expectations with employees through written anti-fraud policies. Firm owners should also consider creating an environment where employees do not fear retaliation for reporting potential workers’ compensation fraud. This can be accomplished by establishing a variety of safe and potentially anonymous ways for employees to report suspicions of fraudulent activity.
Promoting a culture of safety is another avenue for reducing potential claim-related fraud. Fostering a culture where all employees understand the importance of safety can mitigate potential risks and accidents, and ultimately reduce the number of opportunities an employee has to exaggerate an injury.
Workers’ compensation fraud is a serious crime that can have a real impact on business owners and their employees. By demonstrating a zero-tolerance policy on fraud, reinforcing policies and expectations and knowing what signals to look for, accounting firm owners can help reduce the likelihood of fraud in their workplace.