Watching for red flags to prevent workers’ comp fraud

Updated May 16, 2022
file folders labeled investigations and fraud
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file folders labeled investigations and fraudGetty ImagesLandscaping can be a hazardous occupation and even with all the proper protective equipment (PPE) and safety practices, accidents can happen. This is where workers’ compensation comes in to provide wage replacement and medical benefits to injured employees.

While you always want to take care of any employee who was hurt on the job, you also need to be aware of those who would try to take advantage of this system for their own gain. According to the National Insurance Crime Bureau (NICB) workers’ compensation fraud costs American employers, workers, consumers and shareholders $7.2 billion a year.

Below are the types of workers’ comp fraud, what to watch for and how to prevent this from being an issue within your landscaping business.

Types of fraud  

Anyone who plays a part in the system can try to take advantage of workers’ compensation and depending on who is committing the scam will determine what type of fraud it is. Provider fraud is when legal or medical professionals attempt to inflate service prices or conduct random and unnecessary billing.

Premium fraud is when the employer attempts the reduce the amount they own in workers’ compensation premiums. No matter who is committing the crime, it comes down to being motivated by money and, in the case of an employee, time off. Claimant fraud is when an employee commits fraud. There are four main types of claimant fraud:

  1. Fake claims – The injury never happened in the first place or was staged to collect benefits.
  2. Exaggerated claims – An injury occurred but the severity was overstated in order to receive more benefits.
  3. Off-the-job injuries – The worker is hurt when off work but claims they were injured at work to receive benefits.
  4. Double-dipping – The employee works a different job while collecting the benefits from an injury.

Red flags

As a company owner, you’d like to think your employees would not try to exploit your business, but blind faith can end up costing you. Conducting due diligence when claims are submitted and being aware of the warning signs that something isn’t adding up can save you considerable money and help you weed out an untrustworthy employee.

When investigating possible workers’ compensation fraud, do so with care, as making false accusations can result in claims of harassment and defamation.

Below are the top 10 warning signs to be aware of:

  • There are no witnesses to the accident.
  • The employee has a history of making workers’ compensation claims.
  • The worker’s story is inconsistent, vague or doesn’t support the cause of the injury.
  • The injury isn’t reported immediately and there is no valid explanation for the delay.
  • The employee refuses treatment or a diagnostic procedure to confirm the extent of the injury.
  • The employee has a history of frequently changing physicians, addresses and/or employers.
  • The injured worker is difficult to reach at home.
  • The injury occurs just before job termination, the end of a big project or the conclusion of seasonal work.
  • The injury happens first thing on a Monday morning or late on Friday afternoon, usually indicating it actually was from a non-work-related activity.
  • The employee is doing activities that would be impossible with their alleged injury.

If you do suspect an employee of committing fraud, notify your insurance carrier, claims adjustor or state fraud unit.

How to prevent fraud 

Even though there are some bad apples out there trying to abuse a system meant to help hurt workers, you can lessen the likelihood of it happening within your company by taking some preventative steps.

The first step is to carefully screen job applicants. Conducting background checks can reveal a history of suspicious claims or let you know they have a criminal record. By avoiding hiring unscrupulous people, you can reduce the chances of someone manipulating the system.

Make it clear to all of your employees that you have zero tolerance for fraud and encourage employees to report any suspicions of fraud as well. Provide employees a way to anonymously report any possibilities of fraud and take their claims seriously.

Aside from discouraging fraud, make a point to encourage a culture of safety, so there are fewer workers’ compensation claims in general, due to a safer workforce.

When accidents do happen, make sure your employees know who to report to and to do so immediately. Let them know they won’t face consequences for sharing when they’ve gotten hurt, as being treated quickly can help them recover faster.

Even if a claim isn’t suspicious, have a standard investigating procedure for all workplace injury claims, that way you have an accurate record of what happened and can make procedural changes to prevent a similar accident from happening again.

It’s a good idea to stay in regular contact with the injured employee during their time off so you can track their progress and determine when they might be able to return to work. Offering light-duty options can help them transition back into the workforce sooner.

Using surveillance equipment might be interpreted by workers as a lack of trust, but if employees are getting injured on your property, seeing how it occurred can help you implement better safety practices and disprove any false claims.

Having a drug testing policy that includes any time an accident occurs can help you improve your business’s overall safety and lets you know if the individual was abusing drugs at the time of the accident.

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