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Crime Insurance > Overview

Employee Crime on the Rise

The annual cost of corporate fraud in England and Wales is estimated at £10 billion and on a world-wide basis one third of all insolvencies occur as a result of corporate fraud. In a recent survey of identified frauds committed by UK based employees, approximately 30% of these had been with the organisation for over five years. Even losses that do not result in insolvency can have a damaging effect on a company's balance sheet.

Heightened Risk in the 21st Century

As businesses embrace new technological developments, they become inadvertent hosts to advanced exposures and an entire set of new risks. Fraud involving computers is fast becoming a problem in today's technologically enhanced society. Couple that fact with workplace issues such as job insecurity and reduced company loyalty and we have an environment that increases the probability of an employee being dishonest. How Fraud Occurs Weaknesses in internal controls are the major contributing factor to the opportunity to commit crime in the workplace. Collusion between employees and third parties is the second most common element that allows fraud to thrive, followed by the type of industry involved. The retail and financial services sectors acknowledge that employee fraud is an inherent part of their business. In a recent survey undertaken by Ernst &Young, eight out of 10 respondents believed that serious fraud could occur in their organisations and that it would be an increasingly serious problem facing businesses in the future.

Impact of Fraud on the Business

It is difficult to exaggerate the effects of a significant crime on the business. The very existence of the business can be put at risk. Many cases handled by the Serious Fraud Office involve insolvency due to company assets having been stolen or misappropriated either directly by employees, or in collusion with third parties. Other than the immediate perpetrators of the fraud, those held responsible could include directors and senior management of the organisation.

Why Insure?

Whilst stringent internal controls and sound administrative and management practices help limit exposures, they can never eradicate the risk completely. Warning signs may be missed or not acted upon on time. Areas of greater risk may not be identified until too late. Contingency plans put in place to respond quickly upon the discovery of fraud may not have been communicated effectively to all staff. Whilst internal "whistle blowing" may be regarded as an effective tool in combating fraud, not every organisation has a corresponding "no blame" culture to promote this practice. The opportunity to commit fraud is there for everyone. This is why an insurance policy can act as a safety net.

Our Crime policy is wide enough to meet the requirements of all sizes of organisation, from the smallest of companies to the largest multinational conglomerates.

Policy Features

• Broad definition of employee
• Theft, fraud, dishonesty and malicious acts committed by employees acting alone or in collusion with others
• Theft by any third party caused by an act(s) of Computer Fraud and/or Fund Transfer Fraud
• Payment of mitigation costs incurred by the insured in reducing the amount of any loss
• Payment of auditors' fees incurred to substantiate the amount of a claim
• Cover for re-writing or amending computer systems or software programs necessary for correction following a valid claim under the terms of the policy
• Automatic acquisition clause
• No warranted system of control
• No policy requirement that the defaulting employees are to be prosecuted - we feel this is a matter for the insured and the police.