Crime insurance: Protection against thieves and forgers

Businesses hire a multitude of employees from varying backgrounds. The diversity of the employee base dictates that each man is capable of doing deeds, good or bad. It is not possible for the recruitment department to go through every detail of an employee’s history, both personal and professional. There are times when model employees with an exemplary work record and background commit a serious financial crime at the workplace. The criminal charges would be administered by the law, but what about the losses incurred by the company? Crime insurance is what every business needs to mitigate the risk of financial damage due to criminal or unethical employee practices. What is crime insurance? Crime insurance is a form of risk management used primarily to hedge against the risk of an uncertain loss incurred due to criminal practices. Crime as a potential business risk can be detrimental to the efficient profit earning functions of a business. In most cases, large companies are the ones who usually purchase crime insurance. Smaller companies tend to trust their employees and as such, they don’t think about purchasing cover against employee dishonesty. Some companies choose to buy surety bonds instead of crime insurance. What is covered by crime insurance? Crime insurance covers a range of risks and potential losses due to employee malpractice. The list of crimes committed by employees keep growing by the day. Some of the risks covered under crime insurance are: • Cash larceny • Forgery and duplication • Documents and records alteration • Burglary, robbery and theft • Electronic fraud • Embezzlement • Bills and expenses reimbursement fraud • Intellectual property theft Why is it important? The Association of Certified Fraud Examiners (AFCE) stated that American companies lose somewhere between $380 billion and $430 billion per year to employee committed crimes. The average company loses a neat 6% of the total revenue to the fraudulent and criminal activities of an employee. There are even cases of intellectual property theft wherein an employee steal a client list or an application in development and sells it to a competitor. Crime insurance indemnifies you against such major losses. It pays the legal fees for filing a law suit, consulting a lawyer, court dates, financial damages suffered, loss of business and compensation to any company which has been collaterally damaged. Identifying criminal activities Crimes at the workplace are mostly committed by model employees. The ACFE has concluded that in most cases a financial crime committed by an employee is brought to the attention of the management by an employee who has been able to recognize it. Training your workforce to recognize the various methods of conducting financial frauds and crimes is the best way to prevent such things. Crime insurance also requires the company to identify and persecute the perpetrator before writing a check to cover the losses. It is therefore absolutely imperative to identify and curb criminal activities at the work place. Most companies think that they can mitigate and distribute the losses of one financial quarter over the succeeding quarters. What they don’t realize is that most embezzlement cases span an extensive period of time and are so well disguised that internal audits can’t root them out. Companies never manage to fully recover after it has been subjected to the fraudulent or criminal activity of an employee. Crime insurance is there to help organizations get back up on their feet and protect themselves from workplace criminal activity.