Employers beware: over 20% rise in mid-year questionable claims

Questionable claims are claims that the National Insurance Crime Bureau (NICB) member insurance companies refer to NICB for closer review and investigation based on one or more indicators of possible fraud. Increasing at an alarming rate, Workers' Compensation and automobile insurance lines represent the areas of largest fraud activity for P&C insurers. Claimant fraud, which saw a 41% increase, remains the largest Workers' Comp referral reason, almost three times any other category. (NICB Forecast report)

Insurance fraud is typically broken down into two categories - hard and soft. Unlike hard fraud, which is intentional and criminal, soft fraud occurs when there is a legitimate claim, but there is an exaggeration or embellishment of the claims. For example, an employee may injure his leg, but sees this as an opportunity to treat a long-standing back issue or a doctor may authorize unnecessary treatment or inflate the billing. According to analysis by Deloitte, "soft" fraud represents the lion's share of fraud.

Yet, it is this type of fraud that is often difficult to detect and prove and that is generally accepted as a fact of life. Nearly one-third of Americans surveyed said it's OK for employees to stay home from work and receive Workers' Compensation benefits because they feel pain, even though their doctors could certify them as ready to return to work.

Since Workers' Comp is essentially a loan to pay for claims and it is ultimately the employer who pays the cost of the claim plus interest, ignoring the problem or expecting the insurance company to handle it can be a costly mistake. While a rigid, disciplined claims management process is the best defense against fraud, employers need to be vigilant to protect against fraud.

Some possible indicators of "soft" fraud include:

• The length of recovery time is excessive for the injury
• Frequent visits to pain management clinic. The diversion of narcotics, both for street resale and for recreational use is one of the fastest growing areas of insurance fraud.
• The injured employee is never at home when the adjuster calls.
• The injured employee develops new complaints and symptoms and medical treatment shifts and expands.
• The employee is unwilling to accept modified work/light work. If the employee has been cleared for work and properly notified of the return-to-work
• Medical reports include comments that indicate the employee does not seem to be as injured as the employee claims.
• The injured worker repeatedly misses the IME appointment.
• The presence and treatment of pre-existing conditions.
• The injured employee refuses specialty treatment and insists on staying with their primary care physician.
• Changing therapy goals with physical therapy or chiropractic treatment

While the indicators above do not necessarily mean the claim is fraudulent, the claim warrants further examination, possibly surveillance and action. If the employee has been cleared for work and properly notified of the return-to-work opportunities, yet refuses, immediately discuss terminating wage benefits with the adjuster.

Our March 2011 eBulletin includes a red flag checklist and tips on preventing fraud.