Desperate times often lead to desperate measures.
During difficult financial times, employees know that losing their jobs through layoffs, attrition, shutdowns and closures is a strong possibility. The uncertainty of today’s economic climate, coupled with the burden of having limited personal resources and savings to draw from in the event of becoming unemployed, may lead some employees to file fraudulent disability claims.
These employees may feel they have nothing to lose. So, while employers and employees in insurance special investigation units (SIUs) and fraud divisions are always vigilant, their role and importance become magnified during difficult economic periods.
The National Association of Insurance Commissioners’ model anti-fraud law requires insurers to include the following statement on all applications and claim forms: “Any person who knowingly presents a false or fraudulent claim for payment of a loss or benefit or knowingly presents materially false information in an application for insurance may be guilty of a crime and may be subject to fines and confinement in prison.” Not all states have enacted the law, and some states have their own version of this wording, but it does provide at least a baseline for what constitutes fraud.
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Those who file fraudulent claims represent a broad spectrum of people, and are not limited to one industry or occupation. We often find fraudulent claims filed by real estate agents, sales representatives, and other commissioned employees. We are seeing individuals from these sectors come up with creative ways to supplement income to make up the revenue they lost from the poor economy. (See box.)
Employees may now consider filing a disability claim for ongoing medical conditions they may have worked with for years, especially if this means that a disability benefit may supplement their sudden loss of income and saves them from foreclosure on their home.
Here’s a hypothetical case of a construction worker who specializes in home additions. A few years back, this construction worker was in high demand and booked with jobs more than 2 years in advance. However, today, this same worker does not have any jobs booked and is not pulling in nearly the same amount of income. Our construction worker also has rheumatoid arthritis, but he has always found a way to work.
Now with no jobs and a reduced income, our worker decides he can’t work with RA anymore. He decides to file for disability knowing that his benefits will be based on his higher income levels from previous years. It is certainly possible for medical conditions to worsen over time. However, fraud units and claims examiners need to review filed claims to ensure that the insured truly cannot work and that insureds are not filing to make up for the lost income.
While disability benefits only pay a percentage of pre-disability earnings, under some policies this percentage may be based on past months’ (even years’) income and could be more than the employee makes in today’s market.
No matter how difficult their financial situation may become, the majority of people would never consider filing a disability claim. However, as finances become tight, they may opt to reduce the amount of income they spend on medications, doctor visits and appropriate treatment for ongoing conditions. Over time, employees choosing this route will undoubtedly put their health at risk.