By Samuel King, Vice President of Fraud Investigations, EMPLOYERS
In November 2017, Sam King, vice president of fraud investigations with EMPLOYERS (NYSE:EIG) presented a continuing education course to the Independent Insurance Agents of San Antonio on workers’ compensation insurance fraud. Following are key takeaways from the presentation and best practices for agents to help their clients start 2018 off strong and protect themselves from fraud.
What Are the Different Types of Fraud?
While most insurance claims are legitimate, studies indicate that 10 percent or more of all property/casualty insurance claims are fraudulent. In San Antonio, 1,624 workers’ compensation fraud cases were received by the Texas Department of Insurance in 2016. 
When it comes to workers’ compensation insurance, there are two different types of fraud that can directly impact businesses: “claim” related fraud and “policy” related fraud. Policy-related fraud occurs when either a policyholder or insurance agent misrepresents information about their business to obtain a workers’ compensation insurance policy or a policy at less than the appropriate cost.
Claim-related fraud can be perpetrated by the claimant, a medical provider or vendor, or the policyholder during the workers’ compensation claim process. It frequently occurs when someone tries to gain a workers’ compensation insurance benefit by falsely stating that an injury or illness occurred at work, or by exaggerating an existing injury or illness.
While both types of fraud are serious crimes and can negatively impact the workers’ compensation system, more than one in 10 small-business owners are concerned an employee will commit claim-related fraud. 
Workers’ compensation claim-related fraud costs the workers’ compensation system billions of dollars every year and can lead to higher insurance costs for law-abiding businesses.
How Can Agents Help Policyholders?
By helping policyholders understand workers’ compensation claim-related fraud, including how to detect and prevent it, agents can provide a value-added service and ultimately strengthen their client relationships.
To educate policyholders, agents need to be aware of the warning signs of claim-related fraud, basic procedures for addressing it and the documentation required to report it to the proper authorities.
While there is no silver bullet when it comes to identifying claim-related workers’ compensation insurance fraud, there are patterns that can help spot fraud. Experience shows that when two or more of the following “red flags” are present in a workers’ compensation claim, there is a chance the claim may be fraudulent and the employer should notify the agent or carrier.
· Monday morning (or start of shift) injury reports. The alleged injury occurs first thing on Monday morning, or the injury occurs late on Friday afternoon but is not reported until Monday.
· Employment change. The reported accident occurs immediately before or after a strike, job termination, layoff, end of a big project, or the conclusion of seasonal work.
· Suspicious providers. An employee’s medical providers or legal consultants have a history of handling suspicious claims, or the same doctors and lawyers are used by groups of claimants.
· No witnesses. There are no witnesses to the accident and the employee’s own description does not logically support the cause of the injury.
· Conflicting descriptions. The employee’s description of the accident conflicts with the medical history or injury report.
· History of claims. The claimant has a history of suspicious or litigated claims.
· Treatment is refused. The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury.
· Late reporting. The employee delays reporting the claim without a reasonable explanation.
· Claimant is hard to reach. The claimant does not respond promptly to messages or claimant is hard to reach.
· Changes. The claimant has a history of frequently changing physicians, addresses or jobs.
Suspicions of potential fraud should be reported immediately to the workers’ compensation insurance carrier or the Insurance Fraud Unit of the Texas Department of Insurance for further investigation. Policyholders should gather as much information as they can to support the claim, including identifying witnesses and misstatements. Additionally, they should get in touch with their workers’ compensation carrier’s claims department and special investigations unit or fraud investigation department so the carrier can begin investigating.
If the claim results in a criminal conviction, the insurance agent can help their client get the fraudulent claim, or the fraudulent portion of the claim, removed from the policyholder’s experience rating.
Workers’ compensation claim-related fraud can be a costly crime. By taking the time this year to remind policyholders of the “red flags” of workers’ compensation fraud and how to prevent it, agents can build a relationship with their clients and demonstrate the value they bring to the table.
 Texas Department of Insurance, Division of Workers’ Compensation Fraud Unit. Retrieved from: https://www.tdi.texas.gov/wc/smo/wcfraud.html
 EMPLOYERS, More than 1 in 10 Small Businesses are Concerned Their Employees Would Commit Workers’ Compensation Insurance Fraud, Study Finds. Retrieved from: https://blog.employers.com/EMPLOYERSBLOG/tabid/165/ArticleID/219/Default.aspx