Guest Author Jared Jackson, Assistant Division Manager at Centor Insurance & Risk Management, shares his thoughts on the current fraud trends in the workplace.
Sadly, the most prevalent cliché regarding internal fraud is probably the most pertinent. It really is the most trusted employees that tend to commit internal fraud. They are usually amongst the longest serving members of staff as well.
Whether it is because workplace controls have been inadvertently relaxed or there has been a gradual evolution of the role over many years, those in a position to defraud their employers tend to find themselves presented with the opportunity because the possibility is unlikely to even be considered by management.
We see insurance claims range from relatively simple instances of payroll staff awarding themselves unauthorised bonuses, right through to cases taking place over many years and involving sophisticated methods that defraud multiple parties in order to conceal the crime.
Thankfully, there are means available to mitigate the harmful damage that can be caused by these rogue employees. Whilst the ideal position is obviously to avoid fraud through having effective measures in place, there is some comfort in the knowledge that the risk can be transferred to an insurance policy.
A noticeable trend that has developed is for insurers to move away from traditional fidelity guarantee cover, with the increasingly common policy structure nowadays being the aptly named ‘Crime’ policy. The difference is that, as well as employee theft and embezzlement, cover can now be incorporated for third party fraud. Probably the most high profile example is what is often termed ‘social engineering’. Social engineering typically involves a third party masquerading as a legitimate creditor and requesting payment be made to a new bank account; either that or the criminals will impersonate a senior member of management and request special payments to a felonious bank account.
With the evolution from fidelity guarantee to crime policies, a trend has emerged for certain insurers to loosen some of their claims conditions. A particularly relevant example is that the more comprehensive policies do not have a requirement for insureds to notify the police in order to trigger a valid claim. This can be particularly advantageous in assisting the procedures of both quantifying the loss as well as investigating the full nature of the crime.
Finally, a critical aspect of ensuring that your insurance programme provides appropriate protection from fraud is that there has been a shift towards crime insurance being written on an all-risks basis. The policies were initially written by the historic method of listing defined perils, and many still are. Now it is possible to arrange all-risks cover, which means a policy is effectively intended to respond to all forms of fraud except for certain circumstances which are explicitly excluded within the policy in question. This facet can often be overlooked by insurance brokers but it is especially important because, in the event of a loss, it generally puts the burden of proof on the insurer to illustrate why a claim should be excluded, if indemnity is in dispute.
Certainly at Centor, our default position is to recommend our clients have crime policies that are written on an all-risks basis, unless there are mitigating circumstances which render it unviable. In doing so, we are confident that our clients are in the best possible position to rely on their insurance programme to protect them from the damaging consequences of both internal and third party fraud.