Preventing Insurance Fraud


Stuart Clark, Claims Manager at Beehive Insurance

Ten percent of workers compensation claims contain some element of fraud. This can range from reporting fake or non-work related injuries to malingering (staying off of work longer than needed), to double-dipping (working for another employer while receiving compensation for lost wages), to drug seeking, and many other schemes. Preventing insurance fraud can be done with the help of everyone in the workplace.

A Real-Life Example

As a young adjuster, I was handed a workers compensation claim file for a construction worker who was claiming that he could no longer be gainfully employed. He had suffered a back injury about six years earlier and was in the process of obtaining medical reports to state that he was now permanently and totally disabled. As I read through the file, I became familiar with his medical history and the “roller coaster ride” that was his long list of subjective medical complaints. The pieces of the puzzle did not seem to fit. I went back to the information page and noticed that this claimant lived just blocks from my home. I had lived in the neighborhood for over five years and was unacquainted with this man.

After going through the file a couple of times and making many pages of notes, I decided to start watching this neighbor. I found opportunities to drive or walk past his house. I often saw him doing things his doctor reported he could not do. Because of the many discrepancies, I hired a private investigator to get a video of some of the claimant’s activities. The PI came back after only a couple of days and dropped off a videotape of the claimant working on cars and heavy equipment in his driveway. He looked nimble as he was able to slide under and climb over these vehicles without limitations. The video also showed the claimant carrying boxes out of a home repair store and putting them in his truck. Not once on the video did he show limitations or signs of disability.

Once I had all my documentation together, I went to our company’s Fraud Department. We discussed the claim in detail and started a formal fraud investigation. The company Fraud Investigators were former policemen who had years of experience documenting investigations to submit for prosecution. The next step was to meet with the treating physician and show her the video that clearly disputed the subjective complaints made by the claimant. I arrived at the designated time to find the doctor and claimant waiting for me. I was nervous at first, but then got on a roll outlining the subjective complaints. I then played the video for them.

While watching the video, the claimant was annoyed and almost violent with me. The doctor was clearly angry that she had been used by the claimant and after a short but stern discussion, she asked the claimant to leave. She and I then discussed what needed to happen to bring the matter to a close. The doctor wrote a letter in which she stated that she had been misled. She recommended no further medical treatment and that the claimant was medically stable and able to return to gainful employment.

The investigation into this claim resulted in a savings of about $500,000 for the company. That is what the claimant would have received in disability payments over the rest of his projected life span. It also gave me a desire to be very vigilant with possible insurance fraud.

Best Defenses Against Claim Fraud

An employer’s best defense against claim fraud is to remain in contact with your injured workers. Call them at home every few days and/or drive-by to check on them. Have them come into the office to bring in notes from their physician. Do not let them “slip through the cracks.”

The reporting of an industrial incident can also cause you to question the validity of a claim. Many false claims are reported late so they are more difficult to investigate. If an employee is reporting a claim Monday morning that happened Friday afternoon, a “Red Flag” should come up. This could be an injury that happened over the weekend and is now being reported as work related. This is also a tool used by some to get around drug testing.

Listening to other employees is also a great way to get a feel for a claim. Most people are honest and do not like seeing anyone rip off the system. Co-worker tips often provide the most accurate information. I recommend that every employer research workers comp fraud on the internet. If you have any suspicion of fraud, or that something is not right with a claim, do not hesitate to contact your insurance provider.

All insurance companies have their own fraud departments to investigate your concerns. You and your insurance company are in a partnership to get injured workers well and back to work, while at the same time paying out only that which is warranted. By doing so, you will be helping to prevent insurance fraud.

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