More than 1 in 10 Small Businesses are Concerned Their Employees Would Commit Workers’ Compensation Insurance Fraud, Study Finds

RENO, Nev., July 14, 2015; a new poll found that more than one in 10 small business owners (13 percent) are concerned that one of their employees would commit workers compensation fraud by faking an injury or illness in order to collect benefits. It also found that nearly one-quarter of small business owners (24 percent) have installed surveillance cameras to monitor employees on the job and that one in five (21 percent) business owners feel unprepared or unsure of their ability to identify workers compensation fraud. 

Workers compensation insurance is designed to protect employers and employees should an on-the-job injury or illness occur. While rules and plans differ among states, in general, these benefits include weekly payments in place of wages and payment of related medical and rehabilitation expenses. Claim-related workers compensation fraud happens when an employee tries to gain workers compensation insurance benefit by falsely stating that an injury or illness occurred at work, or by exaggerating an existing injury or illness. Workers compensation fraud is a serious crime that can strain business operations, lead to higher insurance costs for businesses, and even undermine honest workers who are legitimately injured on the job, said Ranney Pageler, vice president of fraud investigations at EMPLOYERS. As part of its survey, EMPLOYERS asked small business owners to identify potential indicators of claim-related workers compensation insurance fraud. The activities cited by more than half of respondents included: The employee has a history of claims (58 percent); There were no witnesses to the incident (52 percent); The employee did not report the injury or illness in a timely manner (52 percent); The reported incident coincides with a change in employment status (51 percent). When we look at fraud cases that result in criminal convictions, about half of them are caught within the claims process itself and the other half are tip-offs from the co-workers, friends or family members, or from workplace surveillance video, Pageler explained. Within the claim examination process, common red flags he cited include an employee using a false social security number, having previously undisclosed injuries or medical conditions, or having a permanent total disability claim with total medical costs of less than $500 over a 12-month period. There is no silver bullet when it comes to identifying claim-related workers compensation insurance fraud, Pageler said. Instead, you're looking for a pattern of events or multiple indicators that suggest something may be amiss. 

Some of the warning signs that Pageler recommended small business owners look for include: 

  • Monday morning (or start of shift) injury reports. The alleged injury occurs first thing on Monday morning, or the injury occurs late on Friday afternoon but is not reported until Monday. 
  • Employment changes. The reported accident occurs immediately before or after a strike, job termination, layoff, end of a big project, or the conclusion of seasonal work. 
  • Suspicious providers. An employee's medical providers or legal consultants have a history of handling suspicious claims, or the same doctors and lawyers are used by groups of claimants.
  • No witnesses. There are no witnesses to the accident and the employee's own description does not logically support the cause of the injury.
  • Conflicting descriptions. The employee's description of the accident conflicts with the medical history or injury 
  • History of claims. The claimant has a history of suspicious or litigated claims. 
  • The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury.
  • Late reporting. The employee delays reporting the claim without a reasonable explanation. 
  • Claimant is hard to reach. The allegedly disabled claimant is hard to reach at home and does not respond promptly to messages. 
  • Frequent changes. The claimant has a history of frequently changing physicians, addresses or jobs.


Pageler advises that employers who suspect an employee may be committing claim-related workers compensation insurance fraud should first alert the special investigations unit or fraud unit within their insurance company’s claims department. The appropriate law enforcement authorities will likely be brought into the investigation, as well. Workers compensation claim-related fraud can be a costly crime, but by knowing what signals to look for, policyholders can potentially minimize the costs or damage and protect their businesses.

EMPLOYERS facilitated a telephone survey of small business decision makers through the SSRS Small Business Omnibus Survey. Interviews were completed with a nationally representative sample of 501 small businesses that have fewer than 100 employees. Data were weighted by number of employees, region and industry to reflect the proportion of small businesses in the United States. The margin of error is +/-4.4%. Fieldwork was conducted from May 14 and 29, 2015.

About Employers Holdings, Inc.; Employers Holdings, Inc. (NYSE: EIG) is a holding company with subsidiaries that are specialty providers of workers compensation insurance and services focused on select small businesses engaged in low-to-medium hazard industries. The company, through its subsidiaries, operates throughout the United States. Insurance is offered by Employers Insurance Company of Nevada, Employers Compensation Insurance Company, Employers Preferred Insurance Company, and Employers Assurance Company, all rated A- (Excellent) by A.M. Best Company.  Copyright; 2015 EMPLOYERS. All rights reserved.