How to Protect your Business from Workers Compensation Fraud | DirectWorkComp

How to Protect your Business from Workers Compensation Fraud

Workers compensation is designed to protect employers from lawsuits due to accidents in the workplace and provide coverage to employees for medical and wages in the event of a workplace injury. There are times when employees may file fraudulent claims to receive benefits.  Employers who assign employees to incorrect payroll classes to reduce premium is also fraudulent.   The total cost of this extortion is between 6 and 7 billion dollars annually, according to the Coalition Against Insurance Fraud and the National Insurance Crime Bureau. Not only are the persons  or businesses responsible for committing fraud at risk of punishment, but they are also hurting their employers and small business owners as well. Learn how to avoid potential risks to help secure your business against fraudulent activity.

Failing to report fraudulent activity, detect the activity, or having employees who are taking advantage of a fraudulent situation can be detrimental to your business. Detecting and reporting fraud are the best plans of action to protect your business from huge losses due to lawsuits, criminal infractions, and premium rate hikes on your policy.


Who Commits Workers’ Compensation Fraud?

At each stage of the workers’ compensation claim there is potential for fraudulent activity. Watch the paper trail closely, and look for any discrepancies such as the following:

  • Employees – Claim-related fraud
    • manufacturing stories of an injury that never happened
    • stating an injury happened on the job when it did not
    • overstating the degree of a work-related injury or illness
  • Employers – Policy-related fraud
    • Incorrectly reporting the status of employees as contractors
    • Coding employees as lower risk categories
    • Not carrying insurance coverage when the law requires it
    • Misrepresenting or lying about work-safety programs
  • Health Care Professionals – Medical provider fraud
    • Inflating costs of healthcare treatment
    • Billing for services that were not provided
    • Kickback schemes in conspiracy with other medical providers


What steps can your business take to protect itself against fraud?

Take the necessary steps to safeguard your business from workers’ compensation fraud:

  • Require background checks and drug testing on all new hires
  • Clearly outline physical demands and hazards of all job duties
  • Teach employees how to properly handle equipment and carry objects
  • Have posted the information on how to report workers’ compensation fraud
  • Keep accurate reports of employee records in relation to their roles
  • Provide information for employees on how to report work-related injuries
  • Create a policy for discipline for work comp fraud and tell your employees what will happen if they submit false claims
  • Work with your insurance provider to ensure all codes for employees are correct

Work Comp Fraud



Reporting Workers Compensation Fraud

As soon as you suspect fraudulent activity related to workers’ compensation, you should report the information to your state’s department of insurance. Take a record of all the information you have regarding the claim and provide this information for their investigation. Cooperate with the follow-up steps.

In some cases, you may want to obtain legal counsel if you suspect an employee is committing claim-related fraud.

In the event a health care professional is committing what you believe to be medical provider fraud, you should also contact your insurance provider and advise them of the report you have made.

If you would like a quote or to visit about how DirectWorkComp can help your business please reach out to us at 888-399-1190 or drop us a note at

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