Does your organization have (enough) Fidelity/Crime Insurance Coverage?

January 28th, 2015

In the past 5 years, 35% of private companies in Canada reported a loss due to workplace crime, such as employee theft, vandalism or forgery; theft was the most common type of loss suffered by said 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.

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 best managed 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 for Fidelity/Crime insurance fall into two main categories, although many policies combine both types of coverage:

  • 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 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 specific operations or requirements.

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 their employees are honest, hardworking and loyal. The sad truth is, these losses take place with alarming regularity. Most employees discovered 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.
    • 80% 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 said 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 will report it.
  • A fraud scheme could go undetected for years and could cost hundreds of thousands of dollars or more. It’s difficult 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 6% of its total annual revenue from losses involving employees – on average between $9-$12 per day per employee. For an organization with 40 employees, with 250 working days in a year, this amount to $90,000 (conservatively) 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 point and add robbery and burglary, where small operations are especially likely to be victims, losing at least 20 times more than large corporations. In fact, shoplifting, robbery and burglary put such a disproportionate strain on small firms 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 coverage. We highly recommend you speak to your insurance broker to confirm your limits and coverages.

Blog Author: Aliya Daya | Commercial Account Executive | Rogers Insurance Ltd.

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