Employee Dishonesty
Frequently Asked Questions
- "Do my Clients really need the cover?"
- "Is this cover suitable for the SME market?"
- "Fidelity Guarantee was complicated cover to arrange. Do you still need to negotiate a system of check with the Insured?"
- "What happens if my clients cannot comply with the controls?"
- "Why do I need this cover, I trust all my employees implicitly?"
- "Is it difficult to make a claim under this kind of Insurance?"
- "Do Crime policies provide wider cover?"
Fraud is estimated to be responsible for up to one third of all business failures and costs businesses 10 times more than fire damage.
Reported fraud is at a 10-year high.
Research carried out by financial advisers MacIntyre Hudson, shows that 38 per cent of employers questioned pointed to fraud as the single biggest threat to their business.
51% of British businesses have been victims of fraud in the last 2 years. (PricewaterhouseCoopers, July 2003)
Worker's £1m theft 'sent builder to the wall'
A small Dorset construction company has gone bankrupt after one of its employees apparently stole more than £1 million to spend at bookmakers.
www.timesonline.co.uk 27/01/06
24% of Small and Medium-sized Enterprises (SMEs), almost 900,000 across the UK, report having suffered employee(s) fraud and suffer disproportionately higher fraud losses than large companies. These businesses are less likely than large companies to survive these fraud losses.
Employee fraud is as common in a smaller business as in a large company. However, small businesses often lack financial control and it is not uncommon for one person to write and sign cheques.
There is generally a higher level of trust that exists between colleagues within small organisations. The vast majority of people are honest but this situation does mean that directors can let their guard down and employee(s) can start to abuse this trust. Opportunity makes the thief.
The controls and reference procedures incorporated within our wording acts as a first line of defence against Employee Dishonesty and is an important tool is protecting small companies against this business risk.
How many SMEs could survive the financial stress of losing £250,000 from their business?
Accountant's clerk stole over £300,000
A chartered accountant's clerk forged cheques worth more than £300,000 from his employers to fund a lavish lifestyle of overseas holidays, luxury cars and hi-tech goods.
Edp24.co.uk 18/09/04
We have improved our wording so it defines the cover more clearly.
We have also introduced a straightforward controls and reference procedure, which negates the need to negotiate a "system of check". This acts as a first line of defence and helps your client understand what controls are required to reduce the risk of employee fraud.
If any breach of the controls is "inadvertent" we will still consider a valid claim in full (subject to a £5,000 increase in excess). Only the controls that are material to the claim need to have been complied with.
If your clients are not operating this degree of control over their business then they are far more likely to suffer a loss.
The controls have been designed to reduce the risk of employee fraud and act as a first barrier to prevent losses. A well run company should already be operating within this kind of framework. If a control is not relevant (such as stock checks for a Solicitor) then this can be ignored as only the controls that are material to the business will be required.
The controls can be endorsed to reflect any variances in approach but need to be agreed prior to the policy being issued
Even the most stringent controls can be circumvented by a determined fraudster, but these controls are also designed to mitigate any losses by discovering the fraud in its early stages.
"The most cost effective way to deal with fraud is to prevent it from happening. Once fraud occurs, it is expensive and time consuming to try and recover the losses"
ACFE 2004 Report to the Nation on Occupational Fraud and Abuse
Research from previous claims that we have paid have a consistent trend, one of desperation. A trusted employee can suddenly encounter problems in their personal life unbeknown to their employer such as debts, drug addiction or funding an extravagant lifestyle.
Your "trusted" employees are in the best position to commit fraud and often go undetected for many years. 55% of employee fraud is committed by senior managers. A growing concern is where organised crime place or corrupt existing staff with the single intention of stealing from the company.
Most employees who commit fraud have no previous conviction of fraud related offences. Essentially there is little to distinguish the fraudster from any other employee.
'Family friend' stole £140,000 from surgery
A dental surgery manager stole nearly £140,000 from the practice and spent at least £30,000 on jewellery, a court heard yesterday.
icwales.co.uk 10/03/06
The cover has been improved and is more clearly defined so it is now easier to understand. The controls have been standardised and only apply if material to a claim. We will also consider any claim where the breach of control was "inadvertent".
We also offer 10% of the limit of indemnity (up to £50,000) even without references being obtained. This can be useful for businesses that require casual staff in low risk areas of their operation.
Crime policies do provide wider cover. However, the Insured may already have some sections of the crime cover incorporated within their other commercial insurances.
To avoid any duplication of cover we can include Employee Dishonesty as a section within the Commercial Combined policy and by choosing the Third Party extensions can achieve the same coverage as a traditional crime policy.
Example of a crime cover alternative (link to crime cover alternative page in the menu)
If you would like to know more about how we can help or have any opportunities to explore, speak to your Norwich Union Account Manager or contact us directly.
