Most Common Workers’ Compensation Fraud Types

Most Common Workers’ Compensation Fraud Types

Daniel Hall 21/04/2021 1
Most Common Workers’ Compensation Fraud Types

A well-established workers' compensation system can serve as a vital safety net for workers who may sustain work-related injuries at the workplace.

The compensation comes in the form of medical benefits for the injuries sustained in the course of employment in your company. Not to mention acting as a certain percentage of the affected workers' wages. 

A large portion of employees’ compensation claims are usually valid, but there are a few fraudulent cases that you need to be on the lookout for. Some of these fraudulent claims from workers are more common and easy to detect than others.

Most Common Fraudulent Workers’ Compensation Claims 

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Apparently, workers' compensation costs are on the rise year-in-year-out. Also, these compensations are riddled with fraud worth billions of dollars. This information comes as a result of an increasing number of questionable workers' compensation claims. Even though statistics point to the fake claims at 3% of the claims, this figure translates to a staggering $7.2 billion annually.

Fraudulent employees' claims increase the compensation premiums, which in turn impacts the profitability of your business. As a result, you may incur huge losses, leading to lower wages and fewer benefits for your honest workers. 

Below are some of the most common fraudulent compensation claims you are likely to get from some workers:

1. Misrepresentation Of Off-Time Injuries

Compensation claims for injuries that happened elsewhere and not at the workplace are a common thing among dishonest workers. Some employees may misrepresent off-time injuries, claiming that they are work-related when they are not. Be on the lookout for such cases.

2. Exaggerated Injury Claims

This type of fraud claim may be a little genuine only that workers exaggerate its severity in order to get more benefits and get paid for the off-the-job time. 

3. Fake Injury Claims

As the name sounds, these are bogus injury claims by some dishonest employees in your company. In the real sense, no injuries occurred at any time while in the workplace but such employees will go ahead to file for a compensation claim. A thorough investigation into this type of claim may help save your business a substantial amount of money.

4. Claiming Old Injuries

A few workers may take advantage of the compensation claims to file claims against old or past injuries once they are working for you. Detailed medical history for each worker might help prevent such claims. 

5. Prolonged Recovery

In this regard, workers may try to downplay recovery to stay off the job for a long time. This type of claim aims at benefiting the affected workers for a longer time than it is necessary.

6. Intentional Misclassification

The workers' intentional misclassification is also one of the employees' compensation claims fraud. According to the law in some states such as California, employers are obligated with the task of carrying their workers' compensation insurance as well as paying benefits only for their workers. Due to this requirement by the employment law, employers take advantage by intentionally misclassifying their workers as independent contractors. Employers do so to avoid covering their employees' compensation benefits.

7. Inflation of Medical Bills

Medical providers also play a role in workers’ compensation fraud. In most instances, unscrupulous medical providers go to the extent of inflating medical bills for their employees when an injury occurs in the workplace. Also, the same medical professionals manufacture non-existing medical bills in the hope that the insurance will handle the cost. 

Too many cases of workers’ compensation claims fraud concerning payment of kickbacks or creation of non-existing corporations have also been reported. A perfect example of such a scheme went on for about 15 years, netting one surgeon $5 million in fraudulent kickbacks. 

The Coalition Against Insurance Fraud points out the above-mentioned common types of workers' compensation claims that are deemed fraudulent. As a law-abiding employer, you must be aware of these fraudulent workers' compensation claims to save your business, your reputation, and to avoid unnecessary legal situations. The question is, how do you prevent such false claims among your employees?

How to Prevent Potential Workers’ Compensation Claim Fraud

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The most effective way to avoid employees’ compensation claim fraud is to carry out physical abilities testing. The pre-employment test on your employees’ physical abilities can lower workplace injuries and decrease workers’ compensation costs significantly. 

Most importantly, the test will help you just in case of a legal situation involving your employees' compensation claims. Your employment lawyers will use the results from the test to challenge the allegation brought forward against your business on compensation claims.

Before you start the actual test on physical abilities, make sure that your evaluator asks questions about the relevant medical conditions of the job applicant. In case the medical history comes out positive (for previous diseases or injuries) your evaluator will do baseline measurements of joints, bones, or ligaments of the job applicant. 

The information obtained from the physical abilities testing will act as a sure baseline for comparison when the worker gets injured post-hire. This information will help determine whether the compensation claim for an injured worker is legitimate or not under the existing employment laws in your state.


Even though the laid-down precautions may not eliminate workers' compensation claim fraud entirely, knowing the most common incidents that lead to such fraud cases can help you find the right preventive measures. At least you will protect your revenues and save your business from going down.

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  • Ross Smith

    Well explained Daniel !

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Daniel Hall

Business Expert

Daniel Hall is an experienced digital marketer, author and world traveller. He spends a lot of his free time flipping through books and learning about a plethora of topics.

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