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Types of Workers' Compensation Fraud

By July 26, 2011June 8th, 2020Insurance

According to the National Insurance Crime Bureau, insurance fraud costs insurers $30 billion annually. Workers’ compensation alone costs insurers approximately 25 percent, or $7.2 billion a year, and that number is expected to rise. Fraudulent claims affect everyone – insurers, employers, employees, consumers, etc. – and it is important for you, as a business owner, to be able to identify the types of fraudulent claims that occur. Here are the types of claims for workers’ compensation:

Claimant Fraud – Suspicious employee applicant claim.

Employer Defrauding Employee Employer committing illegal act against employee(s).

Legal Provider – Legal provider inflates billing or materially misrepresents the facts.

Medical Provider –  Medical provider inflates billing, knowingly submits bills with improper medical codes and misrepresents facts.

Pharmacy – Pharmacy inflates bills or falsifies codes.

Misclassification –  Misclassifying the type of workers to obtain workers’ compensation coverage at a lower premium. (Example: classifying roofers as clerical, etc.)

Under Reported Wages – Misrepresenting payroll to obtain workers’ compensation coverage at a lower premium. (Example: Over-reporting wages as if employees are experienced journeyman with less likelihood of injury and thus allowing for lower premiums or under-reporting payroll to keep premiums lower.)

X-Mod Evasion – Misrepresenting claims history by not reporting reportable injuries or by creating shell companies to give the impression of a non or low claims history to obtain workers’ compensation coverage at a lower premium.

Embezzlement – The fraudulent appropriation of funds or properly entrusted to your care but actually owned by someone else.

Uninsured Employer –  Operating business functions without workers’ compensation coverage.