Some people will go to great lengths for a little insurance money.

To collect money from insurance policies, some have faked their death or someone else's; committed murder; burned their businesses to the ground; or staged accidents. With $80 billion spent annually on insurance fraud, it is a serious crime with repercussions that trickle-down to consumers and businesses. In fact, the National Insurance Crime Bureau, Palos Hills, Ill., states that worker's compensation fraud and abuse cost $5 billion per year and is the fastest growing U.S. insurance scam.

The most familiar forms of insurance fraud is when an employee is not supposed to be working because he is collecting disability, but he actually is working at another job, or when an employee exaggerates an injury or complains of other problems that prevent him from working.

Other types of fraud could include a business that misrepresents it workforce. For instance, a business may claim physical laborers are administrative employees to reduce worker's compensation premiums. Or an employee may complain of a Monday morning back injury, which actually resulted from working in his yard or at another job.

Doctors sometimes support fraud by giving false diagnoses or exaggerating a patient's conditions so that the employee will receive more money or time-off. According to a recent American Medical Association, Chicago, survey, nearly one-third of doctors exaggerate the severity of a patient's illness to avoid an early hospital discharge or returning to work too quickly.

The expense of insurance fraud typically is passed onto consumers and businesses, which can have damaging effects on profits, workforce and insurance costs. The Insurance Information Institute, New York, states that 10 cents of each premium dollar is wasted on fraud.

In a 1999 survey of workers by the Insurance Research Center, Cambridge, Mass., 35 percent of respondents stated that it's “almost always acceptable” to prolong a worker's compensation claim by feigning illness or injury. Also, 20 percent said they were aware of a fraud in their workplace.

But this abuse costs businesses money. Businesses lose money because fraud increases insurance premiums for employee health coverage and workers' compensation. There also are the business' expense of lost labor.

To control the costs of crooked claims, many insurance companies will investigate or hire an agency to research a suspected fraudulent claim. Also, insurers are educating customers about the effects of shams and encouraging companies to report fraud. Many insurers have made fighting shady claims a top-priority by creating “fraud units” and training employees to spot a ruse.

For example, an injured worker who is disgruntled or facing a layoff might be scrutinized more closely. Monday morning injuries always are suspect because they could be the result of weekend activities.

To help prevent insurance fraud, companies should:

  • Inform employees that insurance fraud or abuse will not be tolerated.

  • Establish a worker's compensation policy that is reviewed with each new worker.

  • Inform employees that all cases will be investigated to assure a claim's validity.

  • Create a reporting system. Employees have no problem cheating the government or insurance companies but may reconsider before committing fraud against their employer.

  • Consult a professional investigative agency and legal counsel for necessary evidence to deny or discontinue a fraudulent claim.