The Sentinel Effect on Workers’ Compensation Insurance Claims Fraud: Are You an Easy Mark?
The Workers’ compensation insurance ecosystem is complex making it attractive to fraudsters who see it as an easy mark. If we are not vigilant as an industry, we could be paying out far more in fraudulent claims than you realize. This is where the “Sentinel Effect” comes into play—a powerful tool in detecting, deterring, and reducing workers’ compensation fraud.
What is the Sentinel Effect?
The Sentinel Effect refers to the phenomenon where people modify or improve their behavior simply because they know they are being observed. In the context of workers’ compensation, the Sentinel Effect can dramatically reduce fraud by making potential fraudsters think twice before submitting a dishonest claim. When employees, medical providers and plaintiff attorneys know that claims are being closely monitored, they are less likely to commit fraud, reducing your company’s exposure to fraudulent activity.
Are You Experiencing the Sentinel Effect?
Ask yourself this: Are your claimants and service providers aware that your company takes workers’ compensation fraud seriously? Are they aware that you have systems in place to detect fraudulent claims? If the answer to these questions is “no,” then you might not be benefiting from the Sentinel Effect as much as you could be. Fraudsters are less likely to target companies that they know are vigilant, which is why the Sentinel Effect is so crucial. Texas Mutual is a great example of a company who has benefitted from this effect. They heavily monitor for fraud and even publish fraud convictions on their website. Don’t mess with Texas!
Are You an Easy Mark for Workers’ Compensation Fraud?
If you’re not actively monitoring claims using AI and advanced reporting, you might be an easy target for fraud. Seasoned adjusters know what to look for, but your newly minted claims professionals need guidance and augmented intelligence to be effective. Fraudsters often look for companies with lax oversight, knowing that they can exploit the system with minimal risk. Without the right detection tools and a strong culture of fraud prevention, you could be hemorrhaging money on fraudulent claims without even realizing it.
Are You Detecting Fraud Early Enough?
Early detection is key to minimizing the impact of workers’ compensation fraud. The longer a fraudulent claim goes undetected, the more money it costs your company. Innovative AI solutions like CLARA Fraud, examine the behaviors of claimants, medical providers and attorneys from first notice of loss to through settlement. Many insurers use historical reporting to look back and detect fraud, but that will be too late to take advantage of the Sentinel Effect. By implementing tools and strategies that trigger the Sentinel Effect earlier in the claim lifecycle, you can catch fraud before it spirals out of control.
How Big of a Problem is Workers’ Compensation Fraud?
National Insurance Crime Bureau (NICB) estimates that Workers’ Compensation fraud in the United States costs around $30 billion each year making up at least 10% of insurance fraud. Industry experts believe that 1-2% of workers’ compensation claims include some fraudulent behavior, but there certainly are jurisdictions with much higher fraud rates like the County of Santa Barbara where they estimate 10 – 30% of cases have fraud. Workers’ compensation fraud is a significant issue, and it’s likely that your company is facing a bigger problem than you think. Unfortunately, much of this fraud goes undetected, detected too late, or you detect it, but don’t have the resources to fight it. If you’re not actively combating fraud, you could be contributing to this staggering figure.
How the Sentinel Effect Can Protect Your Business
Detect early, pay less, and make fraudsters wary of your company! The Sentinel Effect should be at the heart of your fraud prevention strategy. Here’s how you can harness its power:
- Implement Advanced Detection Tools: Leverage AI including both generative AI and machine learning solutions to monitor claims in real-time. These tools can help flag suspicious activity early, allowing you to investigate before a claim is paid out.
- Educate Employees and Providers: Make it clear that your company is serious about combating fraud. Regularly communicate your fraud prevention efforts to employees and healthcare providers. This awareness alone can trigger the Sentinel Effect.
- Establish a Culture of Integrity: Encourage employees to report suspicious activity and create a culture where honesty is valued. A strong ethical culture can deter potential fraudsters from within.
- Partner with Experts: Work with experts in fraud detection who can provide insights and tools tailored to your business. Their expertise can enhance your existing fraud prevention strategies.
Conclusion: Be Proactive, Not Reactive
Don’t wait until fraud has drained your resources to act. By leveraging the Sentinel Effect, you can reduce the risk of workers’ compensation fraud, save money, and protect your business. Are you ready to make fraudsters wary of your company? Implement CLARA’s AI platform for casualty claims to detect early, pay less, and keep fraudsters at bay!
Schedule a demo today to see CLARA Fraud and the rest of CLARA’s AI solutions in action.
