Fraudulent workers compensation claims cost the Australian economy millions of dollars but only 2% of potentially fraudulent workers compensation claims are referred for further investigation. Cerno explains the detail.
An Economist Intelligence Unit report, Hidden Costs: Insurance Fraud in Australia (2004) alarmingly showed that just over 2% of workers compensation claims exhibiting fraudulent characteristics were referred for further investigation, and only 0.5% of these were declined.
Fraudulent claims cost the insurer and the community, not only in increased premiums, but in the lost time of the employee and overtime to cover that time. The report found the two most common types of fraudulent workers comp claims are:
1. A legitimate workplace injury that becomes exaggerated for excessive costs such as lost time and medical expenses;
2. A claim for an injury that either did not occur at all or did not occur at work. Many questionable claims can be headed off by effective investigation that occurs at the earliest possible stage of the claim.
However there are some crucial reasons why even this may not be enough:
1. Fraud Indicators
Fraudulent claimants are coming up with more elaborate means of avoiding detection, placing a significant burden on claims handlers to identify it.
2.Time for Review
Time-poor claims handlers are often forced to accept the facts of the incident without looking at the specific details further. There are more signs to recognise within incident circumstances which can highlight fraud if time is taken to review the facts.
Are the claims circumstances vague? Do the circumstances match the witness statements of the events? There can often be discrepancies in reports, in particular source medical records regarding injury and prior claims circumstances on the same body part. There may be enough in just a basic review to warrant further investigation.
3. Decision for claims investigations
Many claims handlers don’t know how to get to the bottom of the truth and worry that sending a claim for further investigation may appear excessive and upset a company’s customer friendly image. From a commercial perspective, many don't want to admit they may be vulnerable to fraud or further investigation is hard to justify with tight budgetary constraints. What is certain in the cases where decisive action was not taken and opportunities for investigation were missed, the level of compensation provided far outweighs the saving and investigations fees, ultimately affecting the bottom line.
4. Available investigations teams
Many self-insurers have professional and experienced legal teams but how many of those have experienced and qualified investigators with workers compensation and surveillance experience? Lack of experience or unprepared handlers can prove detrimental to the process of tackling workers compensation fraud. Quite often claims can extend across state boundaries and providers may not be nationally licenced for investigation services.
5. Company brand for fraud
As there appears to be so many cases of undetected fraud, it is likely those with the intention of committing fraud will target companies who do not deal with it or reflect an image of letting fraudulent claims through. Not passing claims through for investigation highlights companies to repeat offenders and observers that fraud can be committed with no fear and will be rewarded.
