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Small-business owners struggle with workers comp fraud

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One in five small-business owners don’t feel prepared to identify workers compensation fraud, according to a survey by workers comp insurer Employers Holdings Inc.

Around 13% of small-business owners said they are concerned that one of their employees would commit workers comp fraud by faking an injury or illness to collect benefits, and 21% said they’re unsure of their ability to identify workers comp fraud, according to the survey, released Tuesday.

Meanwhile, 24% of small-business owners have installed surveillance cameras to monitor employees on the job, the survey found.

Most small businesses trust their employees and take fraud personally, Ranney Pageler, Employers’ Austin, Texas-based vice president of fraud investigations, said Friday.

“When (workers) pull a fraudulent claim, you might as well walk over to the company safe and pull out a stack of money, because that’s what it’s going to cost,” Mr. Pageler said. “It’s a very personal violation.”

Mr. Pageler said he was caught off guard by how many small-business owners said they have installed surveillance cameras. Though they’re commonly found in restaurants and warehouses, he said he assumed the number would be lower.

The strongest indicators of potential claim-related workers comp insurance fraud noted by survey respondents include employees with histories of filing claims, no witnesses to an incident, untimely reporting of injuries or illnesses, and reports of incidents that coincide with a change in employment status.

Mr. Pageler added that a “Monday morning injury” — one sustained over the weekend and reported at the beginning of the workweek — is also a red flag. “That’s the one I see the most,” he said.

The survey was created using information collected during telephone interviews conducted in May with a nationally representative sample of 501 small businesses that have fewer than 100 employees.