Many people think that if their business doesn’t handle cash, they don’t have a crime exposure. Often it’s too late when they realize that if they buy, sell or handle goods and services, there is an opportunity for fraud.

Crime insurance has had many names over the years. Once known as a “3D bond”, or “Fidelity Coverage”, the coverage has evolved over the years. There are numerous classes of business, but the four most common include:

The current industry standard has five (5) main coverages incorporated in the policy. Below is a brief description of each:

Employee Dishonesty:

This covers the loss of money, securities and other property caused by employee dishonesty. The employee may act alone or in collusion with others, as long as it’s not an owner or partner (We can tailor the policy for industries that traditionally have partners, such as law firms). The employee must act with the intent of causing a loss, and either the employee or another person or organization must obtain a financial benefit from the employee dishonesty. In certain industries such as the airline industry, the definition of “other property” has to be amended to incorporate the market value of the “other property”” This can also include a Client’s money, securities or property. Some policies have a broad definition of employee to include temporary employees and volunteers.

Forgery Or Alteration:

This covers losses caused by forgery or alteration of, on or in checks, drafts, promissory notes or other similar instruments. These instruments must be made by, drawn by, or drawn upon by persons other than the insured and is purported to have been made or drawn. Coverage can be added by endorsement for credit, debit or charge card forgery, if such instruments are issued to the insured business or its employees for business purposes. This area may also include coverage involving money orders and counterfeit currency.

Theft, Disappearance, And Destruction:

This covers losses caused by theft, disappearance or destruction of money and securities. The loss may be sustained inside the insured’s premises or banking premises. Or the loss may also be sustained outside the premises while in the care and custody of a messenger.

Computer Fraud:

This covers loss of money, securities and property as a result of computer fraud. The theft follows and is directly related to the use of a computer to frequently cause a transfer of property from inside the premises or banking premises to a person or place outside the premises.

Wire Transfer Fraud:

This covers loss of money and securities as a result of wire funds transfer fraud. The thief uses written or electronic instructions through an electronic funds transfer system to direct the fraudulent transfer of money and/or securities.

Statistics:

-8 out of 10 Crime Incidents are by employees
-In 2007, companies lost an average of $2.4 million to fraud, the majority of it by employees, according to PricewaterhouseCoopers LLP -Crime Incidents cost employers, on average, $9 per day per employee.
-Each year, approximately 6% of an employer’s total revenue goes towards paying for Crime Incidents.
-According to the U.S. Chamber of Commerce, American businesses lose an estimated $53 billion each year as a result of employee dishonesty and it has been estimated that 75 percent of these crimes go unnoticed, leaving companies with no possibility of recovering stolen assets. That’s more than it loses each year from fire. That’s also over 10 times the cost of street crime.
-The American Management Association estimates 20 percent of businesses fail because of employee dishonesty.
-Businesses that earn less than $100,000 in sales are 35 times more likely to suffer from employee theft than those with sales more than $5 million.

Other Possible Policy Features Include:
Full Discovery
Third Party
Coverage for ENTIRE Investigative Costs
Worldwide Territory

Items usually necessary to obtain an indication:
Application
Latest Financials (Audited preferred)
Latest CPA management letter and response
Any Special Exposure Concerns
Depending on the Line of Business and Coverages Desired, further information may be required.