Insurance fraud: Is your client being scammed?


Abstract: Although businesses potentially can become victim to a variety of schemes intended to bilk insurance companies and workers’ compensation funds, on-the-job injury and property-casualty fraud are the most common. But there are specific clues that fraud experts use to uncover dishonest behavior. In addition to investigating workers’ comp or property-casualty claims, they can help prevent such fraud from occurring in the first place.

Insurance fraud: Is your client being scammed?

Insurance fraud isn’t only an insurance industry problem. It’s a problem for all businesses concerned about rising premium rates — not to mention out-of-pocket expenses.

Although businesses potentially can become victim to a variety of schemes intended to bilk insurance companies and workers’ compensation funds, on-the-job injury and property-casualty fraud are the most common. When one of your clients suspects that an employee accident or other claim is bogus, work with a fraud investigator experienced in spotting the signs of insurance scams.

All in a day’s work

Falsified injury claims, unnecessary medical services, missed work and off-hours injuries are some of the most common workers’ comp scams perpetrated by employees. For example, though most accidents are legitimate, the National Floor Safety Institute claims that at least 3% of “slip-and-falls” are staged.

Experts look for several signs that such fraud is being perpetrated:

Curious timing. An employee who reports an on-the-job injury Monday morning, with no witnesses, could be trying to pull a fast one. Workers who get hurt over the weekend pursuing leisure activities sometimes try to turn their woes into a workplace accident. Also worth investigating are employees who report an injury just before a seasonal layoff, strike or other work stoppage.

Short tenure. Workers’ compensation abusers sometimes have little intention of doing any actual work, so experts look carefully at accident claims made by new employees. With a little digging, they sometimes find that an injured new employee has pulled the scam on many previous employers.

Communication issues. If, after repeated attempts, an employer can’t get in touch with an employee on disability leave during the work day, it’s time to investigate. The employee may be “double dipping” — working another job while collecting benefits for an injury that supposedly makes work impossible.

Medical irregularities. Scam artists may describe their accident differently to their employers than they do to their doctors. “Injured” employees also change medical providers frequently and may refuse diagnostic procedures.

Suspicious characters

Like fake workers’ comp claims, property-casualty fraud can be detected if you know the signs. An auto accident claim could be false, for example, if witnesses aren’t available to support the claimant’s story, or if an overly enthusiastic witness or one related to the claimant comes forward at the 11th hour. Fraudulent claimants also frequently push for an immediate cash settlement and may threaten the insured with adverse publicity if the claim isn’t settled quickly.

Such perpetrators may be unwilling to provide identification or a verifiable address. Related behavior includes frequent changes in home address and telephone number, a preference for handling business in person, or reluctance to use the U.S. mail service. In these cases, further investigation often reveals that the claimant has an active claims history under various aliases.

Restaurants and retailers frequently are victims of food poisoning scams. In the case of fraud, the claimant usually is the only person to get sick, and he or she may be unable to produce a foreign or contaminated substance to support a claim. Similarly, manufacturers could be fraud targets if a product liability claimant produces only a package wrapper or box — not the allegedly dangerous product.

Prevention is the cure

In addition to investigating workers’ comp or property-casualty claims, a fraud expert can help your clients prevent such fraud from occurring in the first place. Businesses need to establish and clearly communicate procedures for filing claims, and reporting and investigating incidents, and managers should be taught to spot the signs of insurance fraud.