Is your captive insurance company paying a large worker’s comp claim to a semi-pro wrestler who is jumping off the top rope on weekends?
Let’s hope not!
Workers Comp fraud is real and is a drain on many businesses. Fraud drives up insurance costs and can be a particular drain on companies that self-insure worker’s comp in a captive insurance program.
CIC Services recently attended the Risk Management Society (RIMS) Conference in San Antonio Texas. At the conference, we met with John Wichmann, Head of research & Development at Photofax.
Photofax is typically hired by insurance companies or third party administrators (TPAs) to perform surveillance on Disability, Workers Comp and Liability claims. Photofax is hired as an independent third party to document the activities of claimants.
John noted that at least half of the claimants surveilled were caught performing behaviors that violated their reported limitations – specifically, “30% to 40% of the time we are able to obtain documentation or film that appears the claimant can perform beyond the restrictions they are claiming.” This is money.
John told us that Photofax is the only national company that outfits investigators with surveillance vehicles. According to John, many other surveillance companies simply hire contractors who “use their personal car, sit in front seat, eat Cheetos and look suspicious.” Photofax uses outfitted vans or SUVs and can even conduct surveillance from a distance of 3 football fields away. Their unique approach of mapping neighborhoods and picking the right times and locations enables them to get more film. And getting more film, helps them find the truth more often.
John also noted that, “As an independent 3rd party, we aren’t told how the client uses the film or documentation.” However, it clearly works. “We have a lot of repeat business.” One of our clients reported that “they spent $6 million on surveillance with us, and they saved $60 million that year off of our investigations.” Clearly, workers comp fraud is a real problem.
I couldn’t resist asking John about some of his most interesting cases.
One of the claimants surveilled had a large pay-out for a back injury. This claimant happened to be a semi-pro wrestler who couldn’t resist the urge to wrestle on weekends. In fact, the claimant’s wife was also a wrestler, and they performed tag-team matches together. John said, “we obtained some outstanding film of flips, jumps off the ropes, crazy wrestling moves and even a ladder match.”
John also told us that they track a lot of claimants who can’t stand for a long time – many have restrictions against standing over 20 minutes. “Then we find out they are in a band and make money on the side playing at bars on evenings and weekends.” Suddenly, “victims” who couldn’t stand over 20 minutes can play a bass guitar for three hours straight standing up. This reminds us of an AC/DC song: For those about to rock, we salute you. Photofax salutes you too.
Our time with John provided great perspective as a captive manager. Many businesses turn to captive insurance to help control costs and reap insurance profits. The benefits of captives (or choosing to own all or part of an insurance company) can be eroded by out-of-control claims. Because workers comp claims are often paid out over a long period of time (known as a long tail in insurance speak), can be very costly (often caused by sympathetic judges or juries), and are susceptible to fraud or exaggeration, it is particularly important for businesses to be vigilant about not only controlling workers comp claims (via safety programs, telemedicine, etc.) but also verifying that claims are completely truthful.