According to a study conducted by the ACFE (Association of Certified Fraud Examiners) published in its 2018 Report to the Nations, anti-fraud experts estimate that organizations lose about 5% of their annual revenue to fraud. One potential area of occupational fraud is workers’ compensation fraud. Workers’ compensation fraud is a crime. Under Rhode Island law, such fraud is punishable by civil and criminal penalties, including imprisonment. At Beacon Mutual, we take workers’ compensation fraud very seriously, and we are committed to being part of the solution.
In general, there are three main categories of workers’ compensation fraud:
- Claimant fraud may occur when an employee fakes or embellishes the details of an accident or by providing false information about an injury, such as claiming that a non-work related injury occurred on the job.
- Policyholders may commit fraud by failing to report claims, by misclassifying employees as independent contractors or by withholding information or providing inaccurate information about the true nature of their operations and their employees’ work in order to qualify for a lower rate.
- Healthcare provider fraud may occur when a healthcare professional bills the insurer or employer for services not rendered or by performing unwarranted services in order to collect additional fees.
Our experienced claim representatives are trained to recognize workers’ compensation fraud. As an employer, it is important to learn the common 'red flags' of claimant fraud to help protect your business:
- Employee's description of the accident appears questionable
- Late reporting of claims
- Employee is unable to provide exact date, time and place of workplace injury
- The nature of the injury is inconsistent with the type of work performed by the employee
- Employee fails to cooperate with claim administration
- Alleged accident or injury occurs on a Friday or Monday
- Employee has an extensive claim history
- A' tip' is received that the employee is involved in activity inconsistent with the injury or suffered
a non-work related injury
- Claimant aggressively pursues legal action
- No witnesses to the accident and or alleged injury
The aforementioned list is not all inclusive and there are several additional ways in which claimant fraud may be detected. Beacon Mutual encourages our valued policyholders to be observant and report any concerns as early as when the First Report of Injury is made. The Beacon claim representative will follow up and investigate the claim thoroughly using a number of investigative resources.
Suspected cases of fraud are referred to the Rhode Island Department of Labor & Training Workers’ Compensation Fraud and Compliance Unit which coordinates with the Attorney General’s Office for potential criminal prosecution. When restitution is received in connection with claimant fraud, payments are applied back to the claim for the benefit of the policyholder’s loss history.
Policyholder fraud takes a variety of forms in which employers seek to avoid their legal obligation to purchase workers’ compensation insurance or avoid paying appropriate premium. Here are a few examples of policyholder fraud:
- Under-reporting/hiding payroll
- Paying workers in cash without reporting disbursements to the insurer
- Deliberately misclassifying employees as independent contractors
- Creating a successor / affiliate company to avoid poor loss experience or to hide payroll
Since 2014, the RI Underground Economy and Employee Misclassification Taskforce, a collaboration of six state agencies led by DLT, has been working to protect workers’ rights and law-abiding employers from the harm caused by those who cheat. In 2017 alone, the RI Division of Taxation found 560 improperly classified workers which resulted in $6.2 million in unreported wages.
Policyholder fraud creates a domino effect and everyone foots the bill. It undermines fair competition, threatens the stability of the state’s economy and negatively impacts the workers’ compensation insurance rate-making process. Lastly, when employers are not properly insured, injured workers are not adequately protected. The bottom line is that workers’ compensation fraud hurts everyone.
How can you protect your business from workers' compensation fraud?
The best way is to protect your business is to have workers’ compensation coverage for your employees and ensure that the coverage is being used appropriately! Educate yourself and take action to help fight fraud at your workplace.
If you suspect workers’ compensation fraud, document the facts and contact Beacon Mutual at (888) 886-4450 or online at https://www.beaconmutual.com/fight-fraud/. You may also report fraud anonymously to the Rhode Island Department of Labor and Training Fraud and Compliance hotline at (401) 862-4100 or by email to DLT.WCFraud@dlt.ri.gov.