Unfortunately, theft, embezzlement, and fraud committed against a company, business, or organization are not that rare. In recent years, we have seen and heard about more and more cases in which employees committed embezzlement and caused financial damage to the company—whether it is through direct theft of funds, property, or information from the company or whether through embezzlement or sophisticated fraud, which caused the company’s coffers to be emptied. Unfortunately, the explosiveness of these cases becomes great, among other things, due to the broad powers granted to employees and their access to data and information, which can be worth a lot of money for them.
On the one hand, one of the means that allows the company to grant employees broad powers to advance its interests, and on the other hand, to allow it to be protected against embezzlement and various frauds, is crime insurance.
What is Crime Insurance?
This insurance provides coverage to the company in case of theft, fraud, embezzlement of funds or equipment directly, or against cyber crimes, which result in the loss of funds to the company. The policy provides financial reimbursement to the company due to losses of money, property, or securities caused by an illegal action carried out by one of its employees.
What Does Crime Insurance Include?
The policy covers theft, damage, or destruction caused to money, securities, and/or other property on the insured’s premises or elsewhere.
The policy also covers loss caused by the fraudulent transfer of funds from the insured’s bank account to another bank account.
The policy usually includes an exception for loss caused by an employee the insured knew was previously convicted of embezzlement.
The underwriting of the insurance is done, among other things, on the basis of the number of employees, the size of the company (assets and revenues), and the field of activity.
The policy does not cover consequential loss, including loss of income caused by embezzlement.
The policy can also include coverage according to your ERISA regulations and be a replacement of the bond required for your ERISA program.
Lamda Experts’ Tips for Crime Insurance
The policy trigger is either on a discovery basis or on an event basis. There is usually an advantage to policies based on discovery so that there will be coverage even if the insured found out about the embezzlement long after it occurred.
There are policies that also include coverage for social engineering. Coverage is very important in view of the large increase in these cases.
The policy does not cover consequential loss, including loss of income caused by embezzlement.