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Install safeguards to prevent workers' comp frauds

April 8, 2006
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Workers’ compensation fraud has grown to become a multi-billion dollar a year problem, according to a report on According to the report, the American Insurance Association estimates workers' comp fraud losses at $3 billion a year, while industry watchdog the National Insurance Crime Bureau puts it at $5 billion. Experts believe the difficulty with measuring fraud is that much of it goes undetected.

Crimes can range from "hard" fraud such as collecting benefits for faked injuries to "soft," which can mean exaggerating an injury or staying on benefits longer than necessary.

However, according to the report, employers don’t necessarily need to be suspicious about every workers' comp claim that pops up, as most injury claims are legitimate. Instead, ramp up your fraud-prevention program:

  • Promote a fraud-free workplace. Convey your tough stance on fraud and let employees know how they can report fraud anonymously. Run background checks on employees before hiring. Install video equipment.
  • Consider drug testing. Drug users are more likely to file false claims.
  • Have a plan: put someone in charge of workplace injuries; recommend your medical provider right away; get an accident and injury description; preserve evidence; and get names of witnesses.
  • Know the red flags of fraud: sketchy work history or "job jumper"; child-support lien; extensive criminal record; exaggerated details about incident or symptoms.
  • Work with your insurer's investigative unit when you're suspicious.
  • Prepare a return-to-work plan that includes temporary or alternative duties.
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