Home > Fraud, Insurance > On Systematically Fighting Fraud

On Systematically Fighting Fraud

A recent article on MarketWatch covered the efforts of the California Restaurant Mutual Benefit Corporation in combating insurance fraud.

The article focused on a solid victory for the self-insured group.  CRMBC’s investigation lead to charges being filed against a former manager of Jack-in-the-Box.  Jeanette Gallo entered a plea of no contest on two counts of felony fraud linked to her workers’ compensation stress claim for a robbery in which she participated.

Fraud is a regular topic for this blog, particularly because of its permanent damage – employers will never recover the money fraudulently obtained; it is always spent long before any charges are filed.  The only remedies are deterrence, which requires the cooperation of law enforcement, and prevention, which can be achieved through the proactive efforts of employers.

Having read the MarketWatch article, I reached out to the CRMBC to find out more about their anti-fraud program.  I was lucky enough to speak with Joe Burgess, the Senior Executive Vice-President at CHSI, the program administrator for the CRMBC.

What he described came across as a practical, thorough, and clearly effective program to detect, prevent, and deter the white-collar robbery of California employers by disloyal and unscrupulous employees.

The program begins with education.  CRMBC’s members are given information on how to investigate fraud and how to properly (read: legally) respond to it.

Joe explained that the first three days following an alleged injury are key – after that, witnesses get forgetful, surveillance tapes get written over, and the physical evidence that would normally poke holes in the applicant’s story gets cleaned, put away and forgotten, as the business stops being a fraud crime scene and returns to being a business.

“The key to success in fighting fraud is immediate, documented investigation by the employer and engagement with the employee,” says Joe.

Members are kept updated by newsflash e-mails, training sessions, and a library of materials on the membership website.

The next phase is the bigger investigation, which covers the applicants using surveillance and background checks, and the providers, making sure they are actually performing the services they are billing for (unlike some providers we’ve heard of).

The final stage is the deterrence, which includes cooperation with law enforcement to see these cases prosecuted and the fraudsters convicted.  But, as any prosecutor will tell you, the best evidence on which to build a case would probably have been collected by the employer at the time of the alleged “injury.”

But the value of the program is not in the final step, says Joe: “Success in fighting fraud is not measured in arrests and convictions – those are not that common.  Success in fighting fraud is fewer serious indemnity claims – because  the employer puts processes in place such as rapid response, good initial investigation, [and] engagement with the employee.”

Fraud is a parasitic plague which saps the strength of the workers’ compensation world.  To stop these ticks in their tracks, employers must become their own guardsman – the employers are the best situated to take the lead here.

As Joe puts it, “we can control what we do, not what others do – but by creating the right structured environment we can make it less likely that fraud will flourish.”

Categories: Fraud, Insurance
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