Crime insurance protects businesses from employee dishonesty, embezzlement, forgery, robbery, computer fraud, wire transfer fraud and other offenses that have the potential to cause financial ruin.
These schemes involve every possible angle, taking advantage of any potential weakness in your company’s financial controls. From fictitious employees, dummy accounts payable, non-existent suppliers to outright theft of money, securities and property. Fraud and embezzlement in the workplace is on the rise, occurring in even the best work environments.
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. Because crime-related losses are not typically covered by most insurance policies, crime protection insurance is a necessary component for any business.
Why do I need Fidelity/Crime Insurance?
Fraud and embezzlement in the workplace is on the rise, occurring in even the best work environments. According to a leading international accounting firm:
- 80% of workplace crime is carried out by employees
- One in four employees has either committed or witnessed workplace fraud and abuse
- One in four employees committing fraud against their employer has been with the company for more than 10 years
- Only one in three of those who have witnessed a workplace crime bother to report it
The current industry standard has five (5) main coverages incorporated in the policy. Below is a brief description of each:
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 covers the fraudulent transfer of money, securities and other property from any computer inside your premises or a banking premises to somewhere else outside of either premises. For example, your salesperson was staying in a hotel in Peking (where the employee was conducting business from a rented hotel room) and someone broke in and used the salesperson's laptop to transfer funds to his/her account; this too would be covered.
Wire Transfer Fraud:
Wire fraud refers to fraud that is committed through the use of wires, or electronic means. Wire fraud may be committed using interstate wires, television or radio communications, or the Internet. Wire fraud is an intentional act to defraud another individual or entity of his money or property.
Other Possible Policy Features Include:
- Full Discovery
- Third Party
- Coverage for ENTIRE Investigative Costs
- Worldwide Territory
- Social Media Fraud
Items usually necessary to obtain an indication:
- 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.
“Please see polic(ies) and endorsement(s) for exact terms, conditions and exclusions. Each insurance company has its own policy language. We encourage you to seek legal advice prior to securing any insurance."