Second in a series of articles on Workers' Compensation. Also see "How to Keep Occupational Diseases from Affecting Your Workers' Compensation Costs."
June 8, 2009 — Every successful business has a combination of formal and informal procedures and processes that give it the ability to serve its customers efficiently and cost effectively. Without those procedures, businesses close their doors.
However, when it comes to Workers' Compensation fraud, too many businesses, particularly smaller ones, take a hands off approach and look to the insurance company to handle anything that falls in the Workers' Comp bucket, as if it's the insurance company's problem. Unfortunately, this can turn out to be an extremely costly mistake.
If you want to keep your total Workers' Comp costs down, here are seven practical suggestions for making that happen.
1. The first step is to recognize who pays for Workers' Comp claims. The cost of Workers' Comp fraud comes out of your pocket. If you think it's the insurance company, you're dreaming. It's the employer who foots the bills.
To set the record straight, Workers' Compensation isn't insurance. When you have a claim, the insurance company advances you the money to pay it. Then, your Experience Modification Factor goes up and you are charged an additional premium for a period of three years.
The story only gets worse if a claim is fraudulent. To cover all the expenses involved in any claim, including a fraudulent one, your Experience Mod goes up and your premiums go up accordingly for, once again, three years.
It's also worth pointing out that when the insurance company advances the money to pay your claims, you are charged interest on the "loan."
The first step in dealing with Workers' Comp fraud in your company is to understand that you're the one who pays the piper.
2. Report injuries immediately to your insurance agent. Contact your insurance agent immediately whenever there is any type of injury. Let your agent contact the insurance company. Your agent is the one who cares about you as a customer, and it's your agent who should be managing the claim.
The primary goal is to make sure the injured worker receives the proper treatment, and that the recovery protocols are followed to facilitate a speedy recovery so the injured worker is returned to health and the job as quickly as possible.
When this process is followed, the possibility of fraud is less likely.
3. Train supervisors how to handle injuries. A manager or immediate supervisor is the key contact when a worker is injured, since it the supervisor who has a relationship with the worker.
Since the supervisor is the person who knows and understands the worker best, it's the supervisor who should accompany the worker to the medical facility. The supervisor's role should also involve contacting the worker during recuperation to express concern and communicate the message that the person is wanted back on the job as soon as possible.
This level of contact is critical to the recovery process since it sends the injured worker the clear message that the employer cares and they are wanted back on the job.
While the supervisor's role with the injured worker may seem obvious, far too frequently an injured worker is left feeling alone and cut off from the employer. In such conditions, the employee worries and may begin to think that no one cares. When that happens, a longer than necessary recovery may occur, as well as the possibility of a lawsuit.
4. Figure out if others are getting into your checkbook. There are leaks in any system, particularly those that are highly complicated and involve literally billions of dollars a year. These are the perfect conditions for fraud, including Workers' Comp fraud. Although California has a fraud unit in every district attorney's office in the state, the task of detection is daunting. Employees, insurers, medical providers and employers have all found ways to defraud the Workers' Comp system, no matter how many safeguards are put into place.
Once it becomes clear that it's employers who pay virtually all the Workers' Comp bills and who have the most to lose from fraud, there are steps they can take to minimize or stop it.
5. Help employees understand Workers' Comp. Employee education can help deter fraud. Begin with the fact that Workers' Compensation is actually an employee benefit that's no different from healthcare coverage. One covers them when they are sick and the other when they are injured.
Also, point out that any type of fraud, including Workers' Comp fraud, is a crime, which the company will not tolerate and will report to the authorities.
The only way workers come to recognize that their employer cares about Workers' Comp is by discussing the issues with them, and that includes making it clear that any type of fraud will be prosecuted.
6. Investigate immediately. Gathering information quickly is key. The more you learn about how an injury occurred, the more you can do to prevent it from happening again. Facts fade quickly, and people forget.
Investigating every injury, even a minor one, adds to your knowledge. Your insurance agent can assist you in setting up the right procedures.
If you suspect fraud may be involved, gather the facts and discuss it with your insurance agent. It may be that you will want to engage an investigator to gather additional information. There are literally countless instances of employees claiming an inability to work after an injury and then being photographed living a very active lifestyle.
With the results of an investigation in hand, employers turn the information over to a district attorney's fraud unit.
Unless employers take the initiative to ferret out fraud, there are those who are more than ready to take advantage of the system.
7. Always perform a pre-employment background check. If you want to avoid hiring a Workers' Comp claim waiting to happen — someone with a Worker's Comp injury record — then always conduct a pre-employment background check. According to a Society for Human Resources Management survey, HR professionals report that nearly 100 percent of their companies perform background checks for new hires.
It's the right policy for all companies. But be sure to use a reliable service. You want to be sure the information is reliable and you are abiding by both federal and state laws. The California law is more comprehensive than the federal requirements, for example.
Your background check report should include credit records, social security number, educational records, driving records, criminal records and Workers' Compensation. It's more than worth the investment if it helps avoid just one Workers' Comp claim.
Workers' Comp fraud is personal. It's no different than someone taking money from your bank account or stealing your equipment or inventory. When it comes to Workers' Comp fraud, your business is clearly the victim. Because you have the most to lose, it's up to you to stop it.
About the Author: Duncan Prince, CPCU, CIC, CRM, is a principal and CEO of Invensure Insurance Brokers of Irvine, CA. He has been a commercial insurance underwriter, underwriting manager, producer and agency owner/principal since 1983. A University of California at Irvine graduate, he specializes in complex risks requiring sophisticated coverages and risk management. Prince can be contacted at 949-756-4130 or [email protected].
June 8, 2009 — Every successful business has a combination of formal and informal procedures and processes that give it the ability to serve its customers efficiently and cost effectively. Without those procedures, businesses close their doors.
However, when it comes to Workers' Compensation fraud, too many businesses, particularly smaller ones, take a hands off approach and look to the insurance company to handle anything that falls in the Workers' Comp bucket, as if it's the insurance company's problem. Unfortunately, this can turn out to be an extremely costly mistake.
If you want to keep your total Workers' Comp costs down, here are seven practical suggestions for making that happen.
1. The first step is to recognize who pays for Workers' Comp claims. The cost of Workers' Comp fraud comes out of your pocket. If you think it's the insurance company, you're dreaming. It's the employer who foots the bills.
To set the record straight, Workers' Compensation isn't insurance. When you have a claim, the insurance company advances you the money to pay it. Then, your Experience Modification Factor goes up and you are charged an additional premium for a period of three years.
The story only gets worse if a claim is fraudulent. To cover all the expenses involved in any claim, including a fraudulent one, your Experience Mod goes up and your premiums go up accordingly for, once again, three years.
It's also worth pointing out that when the insurance company advances the money to pay your claims, you are charged interest on the "loan."
The first step in dealing with Workers' Comp fraud in your company is to understand that you're the one who pays the piper.
2. Report injuries immediately to your insurance agent. Contact your insurance agent immediately whenever there is any type of injury. Let your agent contact the insurance company. Your agent is the one who cares about you as a customer, and it's your agent who should be managing the claim.
The primary goal is to make sure the injured worker receives the proper treatment, and that the recovery protocols are followed to facilitate a speedy recovery so the injured worker is returned to health and the job as quickly as possible.
When this process is followed, the possibility of fraud is less likely.
3. Train supervisors how to handle injuries. A manager or immediate supervisor is the key contact when a worker is injured, since it the supervisor who has a relationship with the worker.
Since the supervisor is the person who knows and understands the worker best, it's the supervisor who should accompany the worker to the medical facility. The supervisor's role should also involve contacting the worker during recuperation to express concern and communicate the message that the person is wanted back on the job as soon as possible.
This level of contact is critical to the recovery process since it sends the injured worker the clear message that the employer cares and they are wanted back on the job.
While the supervisor's role with the injured worker may seem obvious, far too frequently an injured worker is left feeling alone and cut off from the employer. In such conditions, the employee worries and may begin to think that no one cares. When that happens, a longer than necessary recovery may occur, as well as the possibility of a lawsuit.
4. Figure out if others are getting into your checkbook. There are leaks in any system, particularly those that are highly complicated and involve literally billions of dollars a year. These are the perfect conditions for fraud, including Workers' Comp fraud. Although California has a fraud unit in every district attorney's office in the state, the task of detection is daunting. Employees, insurers, medical providers and employers have all found ways to defraud the Workers' Comp system, no matter how many safeguards are put into place.
Once it becomes clear that it's employers who pay virtually all the Workers' Comp bills and who have the most to lose from fraud, there are steps they can take to minimize or stop it.
- Be alert to "Monday morning accidents." When investigated, they may be found to have occurred over the weekend. In the same way, take note of injuries that occur when no one else is around, particularly soft tissue injuries, specifically to the lower back.
- Make sure your insurance agent reviews loss runs and the medical bills carefully to make sure the services reflect mandated medical care protocols.
5. Help employees understand Workers' Comp. Employee education can help deter fraud. Begin with the fact that Workers' Compensation is actually an employee benefit that's no different from healthcare coverage. One covers them when they are sick and the other when they are injured.
Also, point out that any type of fraud, including Workers' Comp fraud, is a crime, which the company will not tolerate and will report to the authorities.
The only way workers come to recognize that their employer cares about Workers' Comp is by discussing the issues with them, and that includes making it clear that any type of fraud will be prosecuted.
6. Investigate immediately. Gathering information quickly is key. The more you learn about how an injury occurred, the more you can do to prevent it from happening again. Facts fade quickly, and people forget.
Investigating every injury, even a minor one, adds to your knowledge. Your insurance agent can assist you in setting up the right procedures.
If you suspect fraud may be involved, gather the facts and discuss it with your insurance agent. It may be that you will want to engage an investigator to gather additional information. There are literally countless instances of employees claiming an inability to work after an injury and then being photographed living a very active lifestyle.
With the results of an investigation in hand, employers turn the information over to a district attorney's fraud unit.
Unless employers take the initiative to ferret out fraud, there are those who are more than ready to take advantage of the system.
7. Always perform a pre-employment background check. If you want to avoid hiring a Workers' Comp claim waiting to happen — someone with a Worker's Comp injury record — then always conduct a pre-employment background check. According to a Society for Human Resources Management survey, HR professionals report that nearly 100 percent of their companies perform background checks for new hires.
It's the right policy for all companies. But be sure to use a reliable service. You want to be sure the information is reliable and you are abiding by both federal and state laws. The California law is more comprehensive than the federal requirements, for example.
Your background check report should include credit records, social security number, educational records, driving records, criminal records and Workers' Compensation. It's more than worth the investment if it helps avoid just one Workers' Comp claim.
Workers' Comp fraud is personal. It's no different than someone taking money from your bank account or stealing your equipment or inventory. When it comes to Workers' Comp fraud, your business is clearly the victim. Because you have the most to lose, it's up to you to stop it.
About the Author: Duncan Prince, CPCU, CIC, CRM, is a principal and CEO of Invensure Insurance Brokers of Irvine, CA. He has been a commercial insurance underwriter, underwriting manager, producer and agency owner/principal since 1983. A University of California at Irvine graduate, he specializes in complex risks requiring sophisticated coverages and risk management. Prince can be contacted at 949-756-4130 or [email protected].
