Fidelity & Crime Coverage
BY : ALIYA DAYA ROGERS INSURANCE
In the past five years , 35 % of private companies in Canada reported a loss due to workplace crime or fraud such as employee theft , vandalism , or forgery , with employee theft the most common type of loss suffered by these companies . Experts estimate that 96 % of all companies will experience some type of employee theft without recognizing how much of their organization ’ s potential is being reduced as a result of these activities . Forty-one percent of these companies victimized by fraud decided not to report their cases to local law enforcement , with the fear of bad publicity being cited as the most common reason .
Every company , regardless of its size , is a potential target for white collar crime . Employee fraud is a fact of business life even in the bestmanaged organizations , and it can be costly ; employee theft causes businesses to lose billions of dollars annually . Even if your company conducts background screenings , segregates financial duties , educates employees on how to detect fraud , or employs electronic fraud detection systems , it may still be vulnerable .
WHAT IS FIDELITY / CRIME INSURANCE ? Fidelity / Crime coverage is a form of insurance that protects organizations from loss of money , securities , or inventory resulting from crime . Common Fidelity / Crime insurance claims allege employee dishonesty , embezzlement , forgery , robbery , safe burglary , computer fraud , wire transfer fraud , counterfeiting , and other criminal acts . These schemes involve every possible angle , taking advantage of any potential weakness in your company ’ s financial controls . Liabilities covered by Fidelity / Crime insurance fall into two main categories :
• Money and Securities Coverage pays for money and securities taken by burglary , robbery , theft , disappearance , and destruction .
• Employee Dishonesty Coverage pays for losses caused by most dishonest acts of your employees , such as embezzlement , forgery , alteration , and theft .
• Due to a continuously evolving and creative criminal element , there are other forms of Fidelity / Crime insurance coverage which may be added to your policy as extensions or endorsements . These newer coverages can be modified to your organization ’ s
28 specific operations or requirements :
• Social Engineering Coverage pays for losses as a result of a confidence scheme that intentionally misleads an employee into sending money or diverting a payment based on fraudulent information that is provided to the employee in a written or verbal communication ( email , fax , letter , or phone call ). It is the act of accessing information , physical places , systems , data , property , or money by psychological methods rather than technical methods or brute force .
WHY DOES YOUR ORGANIZATION NEED FIDELITY / CRIME INSURANCE ? Workplace fraud is commonplace , and your company can be victimized by anyone — even the “ trusted ” employee . Every employer would like to believe that its employees are honest , hardworking , and loyal . The sad truth is that workplace fraud takes place with alarming regularity . Most employees who were caught and found guilty of embezzling truly believed that they were merely “ borrowing the money ” and had every intention of paying the money back . . . or so they thought . The reality is that the combination of need and opportunity can make seemingly honest employees turn to criminal acts . Consider :
• The typical organization loses five percent of its revenues to fraud each year .
• Eighty percent of workplace crime is carried out by employees .
• One in four employees has either committed or witnessed workplace fraud or abuses .
• One in four employees committing fraud against his or her employer has been with the company for more than ten years .
• Background checks ( when used ) are little help to employers to mitigate fraud . Most occupational fraudsters are first-time offenders with clean employment histories .
• Only one in three of those who have witnessed a workplace crime will report it .
• Worldwide , the median or average loss caused by Employee Dishonesty is $ 140,000USD , with one in every five cases reporting a loss of at least $ 1,000,000USD . In Canada , the median or average
loss caused by employee dishonesty is $ 154,000USD .
• Social Engineering attacks on businesses have increased 55 % in 2015 – 2016 . Over 100,000 people are affected by these attacks each day .
• Thirty-five percent of large businesses , 22 % of medium businesses , and 43 % of small businesses are targeted specifically by Social Engineering attacks .
A fraud scheme could go undetected for years and could cost hundreds of thousands of dollars or more . It ’ s difficult for a business to absorb that kind of financial impact without feeling dramatic , even devastating , effects .
According to the Association of Certified Fraud Examiners ( ACFE ), the average business in North America is losing five percent of its total annual revenue from losses involving employees — about $ 9 –$ 12 per day per employee . For an organization with 40 employees , and assuming 250 working days in a year , this amounts to at least $ 90,000 off its bottom line .
Smaller companies are often more vulnerable to fraud because they may lack financial or inventory controls that larger companies typically employ . So take the above statistics and add robbery and burglary to them , since small operations are more likely to be victims of these crimes , and you ’ ll see that small businesses can lose at least 20 times more than large corporations . In fact , shoplifting , robbery , and burglary put such a disproportionate strain on small businesses that many disintegrate as a result .
Most insurance policies either exclude or provide only nominal amounts ($ 5,000 or $ 10,000 limits ) of Fidelity / Crime protection under Money / Securities and Employee Dishonesty coverage , excluding Social Engineering altogether . We highly recommend you speak to your insurance broker to confirm your limits and coverages . For more information , contact a Rogers broker at rogersinsurance . ca or call 1.800.565.8132 . +
References :
Association of Certified Fraud Examiners , 2012 Report to the Nations .
Association of Certified Fraud Examiners , Report to the Nations on Occupational Fraud and Abuse , 2016 Global Fraud Study , http :// www . acfe . com / rttn2016 . aspx .
Symantec Internet Security Threat Report 2016 .