16 Dec How to Avoid Workers Compensation Fraud

Workers compensation is illegal, and at this point in time, it is a growing problem. It has the potential to create loads of problems for everyone involved. The best way to avoid workers compensation fraud is to know the types, as well as the warning signs, before it’s too late.

Types of Workers Compensation Fraud

Essentially, there are three different types of this particular fraud. They are experience modification evasion, misclassification of employees, and underreporting payroll.

Experience modification evasion occurs when a business shuts down and later reopens with the goal in mind of getting a lower experience modification factor. Second, misclassification of employees occurs when a business attempts to make its employees appear as having lower risks to injuries in order to pay lower premiums. Lastly, underreporting payroll takes place when the entire staff count is not correctly reported.

Employee Warning Signs

These are just a few of the common warning signs of workers compensation fraud. Firstly, fraud could be looming if the accident takes place after or immediately before a job termination, strike, or layoff. Fraud is also possible if there were no witnesses at the scene of the accident to confirm the victim’s alleged incident. Additionally, the employee’s account of what happened may not align with the actual injury that was sustained. Lastly, a claimant that has an abnormal history with workers compensation claims could be trying to commit fraud, as well – these employees must be dealt with cautiously. Abnormal in this situation would mean a track record of a high number of claims.

Business Warning Signs

For businesses, a common warning sign of fraud is if the injuries sustained by the employee do not align with their duties or job title. A business that has never been through an audit—or actively avoids one—is also something to keep an eye out for. Lastly, a business is somewhat likely to be committing workers compensation fraud if insurance carriers have dropped coverage for them, or if the business has a history with frequently changing insurance companies.
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