The Question Is Not If Your Business Needs a Crime Policy, But Why

Crime is one of the most misunderstood commercial risks in the insurance industry today. There’s a tendency, especially among the owners of small-to-midsize businesses, to think of crime as a danger that exists outside the walls of their establishment. Keep the proverbial doors locked tight, and the bad guys can’t get in.  But the reality is that the greatest danger lies within, and the ‘bad guy,’ very often, is the trusted, friendly face of your most loyal employee.

Think you would know if an employee is stealing from your company? Think again. Studies suggest a whopping 95 percent of employees will steal something from their employer at some point in their career. Most of those losses are minor, but when an employee’s crimes rise to the level of fraud and embezzlement, expect to lose at least $140,000 and for it to take 18 months to discover the theft. One in every five cases of fraud costs $1 million or more.

Are you sure that your most trusted employees would never steal from you? Here’s the bad news: employees who steal the most are the ones who have the most access. In fact, 60 percent of employees caught committing fraud were employed by the company five or more years before being discovered.

Another sobering statistic: chances are good that your business is losing revenue, right now at this very moment, due to fraud, theft or employee dishonesty. The typical business loses 5 percent of its annual revenue to fraud.

When a loss is discovered, business owners often expect their commercial property policy to cover at least a portion of the loss, when in fact, standard policies alone are not designed for that purpose. Case in point: a local business owner was recently surprised to learn that their standard property and casualty policies did not insure them against losses incurred by forged checks stolen during a robbery. The perpetrator was able to cash $16,000 before being apprehended.

So, what is covered by a crime policy? A lot of the things you’d expect–fraud, robbery, embezzlement, and forgery–as well as some things you may not have considered, including identity misrepresentation, wire (transfer) fraud, loss of intellectual assets, theft involving a client’s assets or property, and securities.

Standard fidelity and crime policies are written to cover the most likely scenarios at a cost-effective offering. For clients with complex risks, Sentinel leverages strategic partnerships with the leading fidelity and crime carriers in the region to underwrite customized coverage plans.

If you do not currently have a crime policy, it is well worth your time to have Sentinel provide a quote for you. Most often, your Sentinel risk advisor will be able to quote coverage within a day, after gathering just a few pieces of information relative to your business operation.

Give us a call today to get started: 855-490, 2528, or by email at: abernstein@sentinelra.com.

Here are just a few of the crime claims scenarios that have impacted North Carolina businesses in recent years.

Crime Claims Scenarios

Over several years, an employee conspired with vendors to inflate product and service pricing on invoices paid, allowing the employee to keep the difference. Losses totaled over $1 million.

A company executive delegated an administrative assistant to set up travel arrangements, giving the trusted assistant a corporate credit card and account information for payment. The assistant used the account information to embezzle funds, making her own personal purchases over a period of several years. Losses totaled over $800,000.

Over a period of 15 years, a successful property manager built a following of several property associations. He was in charge of all of the financial operations under his management, including the collection of dues and payment of expenses. However, he had a severe gambling habit. When his own savings ran low, he began to “borrow” money from the various funds he was managing. By the time he was caught, the associations’ funds were missing more than $1 million.

A regional sales director ordered additional inventory of seasonal products for company-approved promotional sales. In reality, the director backdoored the extra inventory, pocketing nearly $350,000 in stolen inventory.