Working the Numbers to
Detect Fraudulent Claims
For workers’ compensation insurers, a wide view and better data
mining techniques are helping spot fraudulent claims. By Bob Violino
Firms that provide workers’ compensation insurance need to be on the lookout for fraud in a variety of areas, such as employees ;ling for fake or exaggerated injuries and
employers ;ling incorrect worker codes to save
money on premiums.
Increasingly, insurers are turning to a variety
of technology solutions to detect and stop
fraudulent claims, which typically fall into three
main categories, says Karlyn Carnahan, principal
at Novarica, a New York-based consulting ;rm.
One is premium fraud, where businesses try to
reduce premiums by misclassifying themselves
or entering the wrong job codes for employees.
The second type is faked injuries, where employees fabricate or in;ate injuries to collect
payment. And the third involves medical mills,
where organized rings of doctors or lawyers
fake or pad injury claims, or bill for treatment
Clearly, fraud is a growing problem, particularly in a sluggish economy. According to a survey of fraud bureaus conducted by the Coalition
Against Insurance Fraud in 2009, the bureaus
reported that, on average, the number of referrals received and cases opened increased in all
15 categories of fraud included in the survey.
The good news for workers’ compensation insurers is that workers’ compensation had one of
the smallest increases in fraud incidents. Nevertheless, the problem continues to be signi;cant for
;rms that provide this type of insurance.
The Special Investigations Unit (SIU) at Chicago-based CNA saw a 17% increase in workers’
compensation suspicious claim referrals in the