White-collar crime can have a lasting effect on a business. Crimes like embezzlement not only result in financial loss but also have resounding impacts on company culture and employee trust – things no insurance policy can protect against.
Embezzlement is happening in businesses of all sizes across all industry sectors in the US, according to the 2017
Hiscox Embezzlement Study. The report found that US businesses impacted by employee theft lost an average of $1.13 million last year, with small and mid-sized companies being disproportionately victimized, representing around 67% of cases.
But there are things insurance brokers can do to educate clients about employee fraud and help clients prevent embezzlement losses, said Doug Karpp, senior vice president, crime & fidelity product head, Hiscox.
Celebrate excellence in insurance. Join us at the Insurance Business Awards in Chicago on October 26.
“There seems to be a general misconception, or a lack of perception, that white-collar crime is a problem. Businesses of all sizes are going about their days without really thinking about embezzlement,” Karpp told
Insurance Business. “At Hiscox, we want to remind people that employee fraud can be a big problem – and that’s where insurance brokers can come into play.
“Brokers can educate clients about this exposure and help them purchase insurance that will protect the company in the event of this type of loss. They can also offer tips for prevention and risk management, and hopefully help clients put controls in place that will prevent losses from employee fraud.”
There’s a wide capacity of fidelity insurance products available in the US markets on a stand-alone or package basis, which can protect against white-collar crime. Generally, the uptake for fidelity insurance is high, especially among companies in the 500+ employee range, according to Karpp.
However, the uptake by smaller businesses is “not as strong as it could be,” he added. This is problematic because smaller businesses have “less sophisticated internal controls and processes” to detect employee fraud.
“Insurance brokers need to be pushing their clients into buying adequate limits and making sure that they’re getting broad enough coverage for the types of exposures they have,” Karpp commented. “On average, only about half of embezzlement losses are repaid fully via insurance or recovery from the employee at fault. That, to me, implies that companies aren’t purchasing wide enough insurance limits.”
There are various tools and programs available which can assist companies with risk mitigation and that can pinpoint fraudulent activity through data analysis – but these aren’t necessary for the smaller businesses, according to Karpp.
“When it comes to smaller businesses preventing employee fraud, it’s not going to revolve around a software tool,” he said. “Rather, it’s going to be a matter of the business owner watching financial transactions, double-checking transfers and keeping a close eye on everything that goes on.”
Related stories:
Two dozen indicted in massive insurance scam
Insurance agent pleads no-contest in decade-long scam
