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A Refresher on Workers' Compensation Claims-Related Fraud

Posted By Chris Prewit, Monday, February 26, 2018

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. [1]

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. [2]

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.



[1] Texas Department of Insurance, Division of Workers’ Compensation Fraud Unit. Retrieved from: https://www.tdi.texas.gov/wc/smo/wcfraud.html

[2] 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

 

Tags:  advice  best practices  fraud  Insurance  litigation  strategy 

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Exit Strategy: Succession Planning for your Small Business

Posted By Chris Prewit, Tuesday, August 1, 2017

Original article published by the Frost Brokerage Service

You have worked hard and overcomed obstacles to build the business you always dreamed was possible. With skill, ingenuity, even a little luck, you’ve succeeded in doing what few people achieve. While you’ve been concentrating on marketing issues, training and recruiting employees, and oh yes selling insurance, you probable may not have given much thought to the time when you will no longer be part of your business through retirement, becoming incapacitated or even dying or leaving for another reason. But business advisors say that neglecting to plan your own exit strategy would be a costly mistake. Why should you plan? Without succession planning, small business owners put their own future and the future of the business they have worked hard to build at risk. Lack of a comprehensive plan can have a negative impact on an owner’s future options, such as the business assets and value, employees and customers, tax obligations, even the businesses very existence. The stakes are so high that most of family and small businesses without a plan fail to make the transition because no one is willing or able to take on the ownership role. That is a sobering thought for small businesses owners who expect to hand over the business to a family member or trusted employee or who will need to sell their business at the best price to fund a future retirement or other enterprise. Perhaps it’s surprising, then, that only 50 percent of American small business owners have a transition plan, according to the Exit Planning Institute, and most of those with plans haven’t documented or communicated them to others. That is a critical omission and ideally, business owners should plan for their exit from the beginning, even if they don’t anticipate leaving for decades. There are three pillars of planning. Succession planning is not a cookie-cutter process with one model that fits everyone perfectly the professional advocate preparation based on “three key pillars”.  You must maximize the value of your business, prepare yourself personally and financially, and plan the act of your life.

Maximize the value of your business, what does that mean? Like many owners, you may want or need to sell your business someday. That can be complicated. Statistically, only 20 to 30 percent of small businesses on the market sell, and approximately 75 percent of owners who do sell profoundly regret the decision within 12 months. Business owners may have unrealistic assumptions about the value of their business. Believing that healthy sales and balance sheets automatically equate to a big return when the company is sold is not realistic. Potential buyers may not agree, especially if they can’t see concrete evidence of value. If selling your agency is part of your plan, ensure that your company is in the strongest possible position, financially and operationally. You will want to minimize areas of risk for your agency, such as preparing others to step into leadership roles, ensuring that essential employees want to stay when you leave, and diversifying your customer base and carriers.

Prepare yourself personally and financially with professional help. Planning a successful exit is a complex and sometimes delicate undertaking that can require the skills and specialized knowledge of multiple professionals. As much as 90 per cent of a typical business owner’s net worth is tied up in the agency and that can complicate the planning process. That’s why an owner should form a team of knowledgeable professionals to help the owner navigate all the issues. The professional recommends the services of a certified exit planning advisor, an attorney, tax advisor, CPA, banker and wealth advisor to review the owner’s personal assets, help explore all available options and ensure the owner’s wishes are accommodated.

Plan the third act of your life.

Building a business means decades of your life’s passion, identity and personal self-worth are linked to your agency. Although leaving that behind can bring changes in family relationships, personal wealth and free time, new realities may not be all you expected. Many agency owners incorrectly assume that they will retire happily to a life of golf, extensive travel and time with the grandchildren. Life’s third act often requires more for lasting fulfillment. Life coaches can help the retired owner determine the owner’s passions and match them with opportunities, such as serving on corporate or nonprofit boards, starting family foundations or even entering into other business ventures. This is your life enjoy it, you deserve it!!!

Tags:  advice  business  careers  retirement  strategy  succession planning 

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