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Battling Against Workers’ Compensation Fraud

Workers compensation fraud has been a particularly troublesome area for the industry, costing insurers and employers about $6 billion a year, according to the Coalition Against Insurance Fraud.

By John Swedo | Updated on April 30, 2011
Fraud continues to be a widespread problem in the property and casualty insurance industry, costing carriers and self-insureds billions of dollars a year. Numerous studies show that 10 percent of property and casualty claims and 36 percent of bodily injury claims involve fraud or inflation of otherwise legitimate claims. Workers’ compensation fraud has been a particularly troublesome area for the industry, costing insurers and employers about $6 billion a year, according to the Coalition Against Insurance Fraud (CAIF).

What Fraud Looks LikeClaimant fraud trends have been on the rise in recent years, reflecting current economic conditions. Claimant fraud occurs when false or exaggerated injury claims, such as those not received on the job, are filed. The National Insurance Crime Bureau (NICB) reports that as the economy has deteriorated over the last several years, the number of suspicious or questionable claims has increased. For instance, the NICB states that the number of questionable claims related to workers’ compensation increased 71 percent between the first quarter of 2008 and the first quarter of 2009 alone.

Equally troublesome is the impact increased medical costs have had on workers’ compensation. Traditionally, 60 percent of injury claim amounts covered the indemnity payment while the remaining 40 percent covered medical costs. Today, the relationship has reversed, illustrating how dramatically medical costs have risen, while frequency and indemnity payments have decreased.

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