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NICB InDepth: Workers' Compensation Fraud - A Billion Dollar Industry

Wednesday, December 6, 2023 | 491 | 0

Workers' compensation fraud is a billion-dollar industry and undermines the integrity of a system designed to protect employees injured on the job. From employees exaggerating or falsifying injuries to employers intentionally misclassifying workers to reduce insurance premiums, the overall cost of workers' compensation fraud is expected to be more than $34 billion a year, according to a study by the Coalition Against Insurance Fraud (CAIF). These deceitful practices can lead to higher compensation payouts and increased medical expenses, placing an undue burden on employers and insurers.


To combat this growing problem, the National Insurance Crime Bureau (NICB), the nation's leading not-for-profit organization dedicated to combatting and preventing insurance crime, recently hosted a national conference focused on providing new insights on organized crime and fraud schemes that involve workers' compensation. The event featured insights from Jay Bobrowsky, Senior Vice President of Special Investigations for the California State Compensation Insurance Fund and President of the Anti-Fraud Alliance.


Bobrowsky noted that there are several prevalent types of workers' compensation fraud, which include employees exaggerating the extent of their injuries, fabricating injuries or claiming a pre-existing condition as a work-related injury. In some cases, he said, dishonest healthcare providers contribute to the problem by submitting inflated or fraudulent medical bills for treatments that may not be necessary or were never provided. This collaboration between unscrupulous employees and healthcare professionals can be part of an organized crime ring and put undue strain on the workers' compensation system.

Employers are not exempt from engaging in fraudulent activities either, said Bobrowsky. Some may intentionally misclassify workers to lower their insurance premiums, like mislabeling employees as independent contractors or manipulating job descriptions to downplay the risks associated with certain roles. While this can result in reduced insurance costs, it jeopardizes the financial stability of the workers' compensation system and leaves legitimately injured workers without the support they need.

Bobrowsky said preventing workers' compensation fraud requires a multi-faceted approach and that technological advancements, such as data analytics and artificial intelligence, are becoming increasingly valuable in detecting patterns indicative of fraud. These tools can analyze vast amounts of data to identify anomalies, flagging potentially fraudulent claims for further investigation. "
It is important to be aware of the trends, and really look at the data," said Bobrowsky. "Data tells the story. If you can understand your data, do more data analytics, you can get a precursor to what's going on. We're going to see over time that proactive data analytics is looking for patterns and trends that you might not see immediately. If you look at 10,000 claims from a high level, using data analytics, you might see referral networks, common phone numbers, and trends that you wouldn't see one by one."

Fraud investigators are crucial in deterring workers' compensation fraud and use various tools, including surveillance, interviews, and data analysis, to identify suspicious claims and fraudulent activities. Organizations like NICB also play a critical role in combating this problem, according to Bobrowsky, because tackling this crime requires a collaborative effort involving employers, insurers, law enforcement, and technology to create a more resilient and fraud-resistant framework.


"The best way to combat this problem is to collaborate with your peers, industry and also law enforcement," Bobrowsky said. "Organizations like NICB really keep current on the methods and tactics used to perpetrate these crimes because they host conferences that feature classes, and new publications that are vital in identifying new trends and keeping up to date on what's going on and what to look out for." He said NICB understands where the trends are before they really become a problem. "I think that's where the future's going to be. And really NICB is going to be the forefront of that."


ABOUT THE NATIONAL INSURANCE CRIME BUREAU: Headquartered in Des Plaines, Ill., the National Insurance Crime Bureau (NICB) is the nation's leading not-for-profit organization exclusively dedicated to combatting and preventing insurance crime through Intelligence, Analytics, and Operations; Education and Crime Prevention; and Strategy, Policy, and Advocacy. NICB membership includes more than 1,200 property-casualty insurance companies, vehicle rental companies, auto auctions, vehicle finance companies and self-insured organizations. NICB member companies wrote over $582 billion in insurance premiums in 2021, or more than 82% of the nation's property-casualty insurance. That includes more than 96% of the nation's personal auto insurance. To learn more, visit www.nicb.org.



Joe Brenckle