The Social Security Administration isn’t the only organization that needs to worry about disability fraud. Many employers provide private disability insurance policies. Self-employed and some traditionally employed individuals also purchase private disability coverage.

Fraud perpetrators can file false claims under any of these types of policies, leaving insurers on the hook — and the rest of us paying higher premiums. But fraud experts have tools for detecting such scams.

Typical scenarios

Disability fraud typically takes one of these forms:

  • An individual who had a legitimate disability continues to make claims after he or she has recovered or is again able to work, or
  • A perpetrator fakes an injury.

False disability claims are relatively easy to make because pain can’t be measured objectively, And there are plenty of unethical medical providers willing to provide false documentation, for either a share of the proceeds or reimbursement from insurers.

Predictive analytics

One of the newer tools for finding false disability claims is predictive analytics. Private insurers and government agencies have used it to extract information from existing data sets to determine patterns and predict future outcomes.

In the case of disability fraud, analytics can identify red flags (for example, a disproportionate number of claims involving a specific health care provider) to allow for further investigation before a potentially fraudulent claim is paid. Early detection holds obvious advantages over the historical “pay-and-chase” model.

Other tools

Forensic accounting techniques also can be used when evaluating claims. It’s not unusual for claimants to report preinjury income higher than they actually earned or postinjury income lower than received. A forensic accountant can review income and expense documentation to obtain an accurate picture of the claimant’s losses.

Take a fraud perpetrator who is self-employed and owns his business’s property. He might try to hide income by paying above-market rent. In such a case, a fraud expert would look for a rent increase. The expert might also compare the subject’s business expense ratio against industry averages.

Social media is useful for ferreting out false disability claims, too. Fraud experts often find photos of sports participation or other evidence that contradicts supposed physical limitations. Even when perpetrators are smart enough to leave such evidence off their own social media accounts, experts often find it on their friends’ and family members’ pages.

Techniques evolve

While the methods of committing disability fraud don’t change much, techniques for detecting it continue to evolve. Contact us for information about disabling disability fraud.

© 2018


Tony LaNasa, CPA/CFE