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Fraud: No Small Matter For Small-Businesses
Workers' compensation, which is required by law in nearly all 50 states, provides medical and disability coverage for employees who are injured on the job. Employers' Liability, typically included on a Worker's Compensation policy protects employers from liability for an accident involving an employee. Because it is required, business owners often view it as a burden and another operating expense, but it can safeguard a company from the exorbitant costs of defending claims, even if those claims are considered to be fraudulent. Requesting Workers' Compensation insurance quotes from several companies can help business owners find the most cost effective coverage, as well as ensure they are adequately covered.
Consider that in 2007, according to the Bureau of Labor Statistics, there were more than 335,000 cases of employees injured on the job due to contact with objects and equipment. How many of those were valid claims, and how many were found to be fraud?
Often employers can uncover fraudulent claims, and are typically in the best position to do so. Workers' Compensation fraud is when employees knowingly lie to collect benefits. For instance, if an employee claims an injury is work-related, when in fact it is not, or they exaggerate an injury, or continue to work, secretly, while gathering benefits. There are also several proactive steps business owners can take to identify and fight fraud. Some red flags to look out for include:- New employees - Statistics show the newer the employee, the greater the chances of fraudulent claims.
- Disgruntled employees - In some cases, employees who are demoted, fired, laid off or denied vacation time, believe they have good reason to file a bogus claim.
- Employee is unreachable - If the employee is difficult to contact, or never home, they may be holding down a second job while collecting benefits. This is referred to as "double-dipping" and is considered fraud.
- Accidents occur on Fridays or Mondays - When accidents occur on either of these days, and other red flags appear, suspicion should be raised.
- No witnesses/tips from co-workers - Be cognizant of alleged accidents with no witnesses, particularly if the employee's tasks involve working with others. Take note of tips from co-workers who may suspect fraud.
- Inconsistent accounts of the accident - The employee making the claim may give varying reports of the accident to the employer and the doctor. Also, watch for differing reports from the witnesses and the injured employee.
- Cannot recall details - The injured employee may not be able to provide specific details of the injury, or the date, time and location of the accident is unknown.
To reduce the risk, business owners should implement a few prevention tactics. It is often easier to prevent fraud than to fight it. Additionally, keeping claims to a minimum will help prevent Workers' Compensation insurance companies from increasing rates. Prevention tactics might include:- Focus on safety - Make the work environment as safe as possible, this will reduce the chance for accidents and provide little opportunity for an injury to be faked.
- Know who is being hired - Background checks and verifying references on all applicants can help employers avoid possible pitfalls.
- Educate employees - Demonstrate to employees how fraudulent claims often cause Workers' Compensation insurance companies to increase premiums, which could result in lay offs, loss of benefits or bankruptcy.
- Implement a return-to-work policy - Employers should develop a program, and explain to applicants, that they will work closely with the medical care provider to help them return to work as soon as possible.
- Continued communication - Maintain regular contact with the injured employee while they are away. Document every contact and attempt at contact.
- Implement a zero-tolerance policy - Be sure employees understand that fraudulent claims can result in termination or prosecution.
It is increasingly important employers review their Workers' Compensation insurance policy to ensure they are adequately covered. Business owners should request and compare Workers' Compensation insurance quotes from several insurance companies. Coverage should include medical expenses, defense of employee lawsuits, settlements and in appeal procedures, bonds or judgments.
About the Author James Cochran is the founder of Business Insurance Now. For over a decade, Jim has been helping clients get the best small business insurance available. Business Insurance Now's network of carriers can get you the best quotes on commercial general liability insurance to cover your small business or workers comp insurance to cover your employees.
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