Taking the Mystery Out of Fraudulent WC Claims

For most employers, workers’ compensation insurance is a difficult product to purchase and expensive to administer. While it is a legal necessity, and ultimately vital for a company’s financial well-being and the well-being of its employees, workers’ compensation comes with a host of administrative concerns, budgetary questions, and interoffice communications headaches. For HR managers, setting up a system to receive and submit claims, educate employees, prevent abuse, and identify potentially fraudulent cases can be overwhelming, and as a result, the very task of acquiring and renewing the product becomes distasteful.

There are, however, some useful guidelines that can help employers — and HR managers in particular — understand the claims that are submitted by their employees. In addition, Professional Employer Organizations (PEOs) that work directly with brokers to provide insurance options to businesses can help alleviate the administrative burden by assuming the key responsibility of administering claims and providing useful employee communication tools and expert advice and counsel. One of the most frustrating parts of workers’ compensation insurance, aside from the paperwork, is the concern about fraud that all too often accompanies a claim. While the majority of claims are valid and submitted by hard-working employees who have encountered unfortunate injuries on the job, anecdotal and statistical evidence shows that fraud remains widespread. The Insurance Information Institute estimates that all property/casualty insurance fraud costs about $30 billion a year in the United States; the National Insurance Crime Bureau (NICB) suggests that approximately $7 billion of this can be attributed to workers’ compensation scams in various forms. Facing difficult economic times and growing financial pressures, employers are quite aware of the impact of workers’ compensation insurance on their balance sheets, and they are increasingly mindful of the connection between fabricated claims and rising insurance costs.

While there is a growing desire to root out fraud, doing so is a challenging task. Some experts suggest that fraudulent claims may be on the rise, as employees themselves face mounting financial problems in the wake of the economic downturn.