The Hidden Cost of Workers’ Compensation Fraud—and How to Protect Your Business

When most business owners think about workers’ compensation, they think of employee injuries and medical claims but there’s another side to the story that doesn’t get talked about enough: Fraud. Workers’ compensation fraud is more common than you might think—and it costs U.S. businesses billions of dollars each year.

Whether it’s an employee exaggerating an injury, an employer underreporting payroll, or a provider billing for services never rendered, fraud impacts premiums, increases claim times, and hurts honest businesses.

What is Workers’ Comp Fraud?

Workers’ compensation fraud happens when someone deliberately provides false information to benefit financially from the system. It can be committed by employees, employers, medical providers, or even legal professionals.

Here are some common examples:

Employee Fraud

• Faking or exaggerating injuries that never occurred or weren’t job-related
• Working another job while collecting disability payments
• Failing to report recovery or returning to normal activities while still claiming benefits

Employer Fraud

• Misclassifying employees as independent contractors
• Underreporting payroll to reduce premium costs
• Not carrying coverage when required by law

Provider Fraud

• Billing for services not provided
• Overtreating or upcoding services to inflate medical bills
• Conspiring with employees to keep claims open longer for financial gain

The Cost of Fraud

Fraud doesn’t just hurt the insurance companies—it raises premiums for everyone, especially small and mid-sized businesses. It also slows down legitimate claims, clogs up the system, and puts pressure on honest workers and employers.

How to Spot Red Flags

Being proactive is your best defense. Here are a few warning signs to look out for:

• The injury report doesn’t match witness statements or camera footage
• The injury occurs right before a weekend, vacation, or layoff
• An employee is reluctant to receive treatment or refuses diagnostic testing
• The employee has a history of workers’ comp claims
• You observe the injured employee performing activities inconsistent with their injury

How Employers Can Protect Themselves

1. Implement a Strong Safety Program
   Prevention is the first line of defense. Train your team, keep records, and create a culture of safety.
2. Use Surveillance & Documentation
   Document incidents immediately. Use security cameras, incident reports, and witness statements to back up your claims.
3. Work with a Trusted Insurance Agency
   At Cal-Society Insurance Services Inc., we don’t just issue policies—we help you protect your business from fraud. From claims support to employee education, we’re in your corner.
4. Encourage Honest Reporting
   Let your employees know that fraud is taken seriously. Offer anonymous ways to report suspicious behavior.
5. Partner with the Right Investigators
   If something doesn’t feel right, we can connect you with licensed investigators to take a closer look.

Don’t Let Fraud Cost You
Protect your business with the right coverage, the right support, and the right insurance team. Contact Cal-Society Insurance Services Inc. today for a free consultation or policy review.

Phone: 1-800-773-1663

Email: [email protected]