Crime / Fidelity Coverage


No Company is Immune to Crime Losses

Mergers, acquisitions, downsizing, restructuring, rapid expansion, and globalization have increased the challenges of maintaining a strong system of internal controls. Likewise, the expansion of computers has drastically changed the speed with which fraud can occur.

Employee Theft is on the Rise

The Association of Certified Fraud Examiners (ACFE), in its 2008 Report to the Nation on Occupational Fraud and Abuse, estimated that fraud costs U.S. businesses more than $600 billion annually. Furthermore, the report states:

  • More than half of the frauds in the study caused losses of at least $100,000, and nearly one in six caused losses in excess of $1 million.
  • 63% of fraud schemes were perpetrated for more than 12 months before detection, with more than 40% lasting two years or more.
  • Employee fraud and abuse accounts for about 7% of total annual revenue, or about $4,500 per employee.
  • Small businesses represent 38 percent of all frauds, but they are more vulnerable to loss.*
  • Dishonesty schemes in a small business cause a median of $200,000 in losses — exceeding that of larger businesses.*

In another survey, 39% of asset misappropriations was the result of billing schemes. The cost of this fraud comes right off a company’s bottom line. Purchasing schemes involving kickbacks, accounts payable fraud involving ghost vendors, payroll and check fraud, or inventory theft can reduce corporate profits by millions of dollars.

Crime Insurance can Protect the Bottom Line.

Commercial Fidelity Insurance (crime insurance) is a form of First Party Insurance providing indemnity to Insureds.

Examples of covered loss include loss due to employee dishonesty, robbery, burglary or mysterious disappearance. Additionally, crime insurance can be tailored to provide coverage for your company’s ERISA based plans, eliminating the need for an ERISA bond while potentially providing broader coverage. By law, every ERISA-based plan is required to have an ERISA bond or fidelity coverage. 

Additional Examples

Embezzlement = $244,000
An employee altered company deposit slips after the owner of the company had approved them. The employee would prepare two deposit slips: one depositing funds into the company’s account, the other depositing funds into the employee’s bank account. The embezzlement continued uninterrupted for three years because the employee handled both bookkeeping and deposit activities for the company. The employer was forced to lay off several valued employees.
Stolen Inventory = $345,000
A regional sales director took on additional inventory of products for alleged seasonal sales pushes. In reality, a portion of that inventory was sold “out the back door” unbeknownst to corporate headquarters. That same sales director had been named “Employee of the Year” several times over his 17-year career.