Why Do I Need Crime Insurance?
You may feel that your employees would never steal from you or that your business would never be the victim of theft, but the harsh reality is that nearly every business is eventually victimized by fraud or theft. In this day and age, thieves (including your employees) do not need direct access to cash to steal from you; merchandise, supplies and securities are all fair game. You may also be susceptible to losses in the event that finished products or even raw materials are stolen right from under your nose. Essentially, any product can be a target for thieves if there is an opportunity to make a resale profit.
While standard property and inland marine insurance policies provide some protection from criminal acts, they often do not cover losses resulting from employee dishonesty. Crime insurance was developed to deal with the limitations of other policies and extend protection to include the fraudulent activities of employees.
For example, the vice president of Koss, a Milwaukee-based stereo equipment manufacturer, was sentenced to 11 years in prison for embezzling over $30 million during a seven-year period. Similarly, an IKEA call center employee stole nearly $400,000 in 2009 by manipulating the company’s phone and mail order system to issue himself customer refunds.
While examples from large companies are more likely to garner attention, smaller companies may actually be more vulnerable to employee theft. Smaller companies tend to pay less for doing the same job at a bigger company, so employees might “even the score” by stealing from the company. Smaller companies also tend to trust their employees more and have fewer anti-fraud measures in place, increasing their vulnerability to theft.
No matter the size of your company, employee theft remains a very real possibility, which is why it’s important to take steps to insure your business against losses stemming from an incident.
Not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. © 2014 Zywave, Inc. All rights reserved.