According to the National Insurance Crime Bureau, workers compensation insurance fraud costs insurers and employers more than $7 billion every year. That’s a staggering liability, and it’s one of the fastest growing areas of insurance fraud. And it’s not just about employees cheating the system as many might think. In fact, workers comp claimants only account for a small percentage of overall workers compensation fraud.
So who’s committing all of this fraud?
- Medical providers and organized crime. Medical providers that exaggerate treatments for minor injuries or bill for treatments not actually provided use a number of excuses for their actions, including easy exploitation of loopholes in the system or “just doing what the competition is doing.” And organized crime is increasingly involved in workers comp fraud, running operations such as storefront clinics where no treatment is actually provided and durable medical equipment companies that don’t really provide equipment to patients.
- Employers commit premium fraud by underreporting payroll, misrepresenting job classifications or their type of business, or misclassifying employees as independent contractors. Most do it to reduce insurance premiums, cut costs, underbid competitors, or achieve bonuses tied to safety programs.
- Claimants (employees) who commit fraud have a number of motivators: financial problems, no medical insurance, a sense of entitlement, or a recent layoff or notice of impending layoff. With the struggling economy and government cutbacks, some unfortunately turn to fraud in search of an easy-money solution.
It’s a costly problem. During fiscal year 2013-2014, the California Department of Insurance fraud division identified 5,729 suspected fraud cases, made 255 arrests, and referred 248 cases for prosecution during the, with potential losses of nearly $250 million. And workers compensation fraud impacts your business in more ways than you might think – higher premiums, lost jobs, lost pay, weakened business, and added stress for your employees. So fighting fraud is a risk management necessity.
It’s also a daunting task. Everyone involved in fighting fraud – insurers, employers, state insurance fraud bureaus, and law enforcement – has major hurdles to overcome in detecting, identifying, and prosecuting fraud.
But new technologies and analytic capabilities are changing the game.
The insurance industry is using a growing and increasingly sophisticated arsenal of fraud-fighting tools:
- New technologies that allow carriers to run automated queries against underwriting, loss, and treatment data to provide crucial checks and balances, helping to systematically spot employee, employer, and provider fraud and cut down on lost premium and fraudulent claim payments.
- All-claims databases that provide access to industrywide claims histories and allow analysis of claims activity that can reveal suspicious patterns or preexisting injuries.
- Databases that provide insights into medical provider billing activity and can reveal questionable patterns.
- Data analysis and visualization software that shows links between certain data elements in claims that can reveal suspicious behavior, such as links between individuals involved in multiple claims.
- Social media, which can be used to confirm vital information such as a claimant’s identification, policy application information, alibi, disability status, and facts of the loss. Photos can even include metadata that can reveal details about a person’s location when the photo was taken.
Fighting workers compensation fraud continues to be a formidable challenge, but evolving antifraud technology is providing some of the most powerful tools the insurance industry has in the fight.
But insurance fraud isn’t just an insurance industry problem – it costs businesses like yours millions of dollars every year. That’s why you need an insurance partner who is taking advantage of these new technologies to provide you with cutting edge protection against workers compensation fraud. Give us a call at RepublicCapital. We’ll help you take back control of your workers compensation costs.