Crime & Fidelity Insurance can protect a business against certain direct financial losses caused by employee dishonesty, third-party crime and other insured fraudulent acts.

The name and scope of cover vary between insurers. It may also be described as Commercial Crime Insurance, Fidelity Insurance, Employee Fraud Insurance or Fidelity Guarantee Insurance.

What can Crime & Fidelity Insurance cover? #

Depending on the insurer and policy wording, cover may be available for losses involving:

• employee theft, fraud or dishonesty;
• manipulation or diversion of payments;
• fraudulent expense claims;
• theft of money, securities or other insured property;
• forgery or counterfeit currency;
• specified third-party crime;
• computer crime;
• social engineering or funds transfer fraud; and
• other insured criminal or dishonest acts.

Not every policy includes every section. Limits, sublimits, excesses, exclusions and verification requirements can differ substantially.

What is employee fraud cover? #

Employee fraud or fidelity cover can respond when an employee dishonestly takes or redirects money, securities or other insured property.

Examples can include stealing business funds, diverting customer receipts, creating false supplier payments, manipulating payroll or submitting fraudulent expenses.

The policy definition of an employee, the required dishonest intent and the basis used to calculate the direct financial loss are important.

Can external crime be covered? #

Broader Commercial Crime policies can also cover certain criminal acts committed by people outside the organisation.

This may include forgery, counterfeit currency, theft of money or securities, computer crime and other specified third-party crime.

Is social engineering automatically included? #

No. Depending on the insurer, social engineering cover may be automatically included, unavailable, or available only by request or endorsement.

Where it is available, it can have a separate sublimit, excess and verification conditions. Crime and Cyber policies should be reviewed together because the position differs between insurers.

Can clients’ money or property be covered? #

Some specialist policies can extend to certain client money, securities or property where the insured business has custody of it or is legally responsible for it.

This should not be assumed. The exposure should be disclosed and the proposed policy wording checked carefully.

Can investigation and recovery costs be covered? #

Some policies may include specified forensic accounting, investigation, legal or recovery expenses.

These benefits are policy-specific and can be subject to separate limits or insurer approval.

Who should consider Crime & Fidelity Insurance? #

Crime & Fidelity Insurance can be relevant to businesses of many sizes, particularly where employees or other people can:

• access bank accounts or financial systems;
• process or authorise payments;
• create or change suppliers;
• manage payroll;
• handle cash;
• hold company credit cards;
• control customer refunds;
• access valuable property; or
• hold client money or property.

Modern fraud does not need to involve physical cash. Losses can arise through electronic transfers, false invoices, manipulated supplier details, online banking and other financial systems.

Are smaller businesses exposed? #

Yes. Smaller businesses can have fewer people available to separate duties such as creating suppliers, approving invoices, making payments and reconciling accounts.

A trusted or long-serving employee does not remove the exposure. Fraud can remain undetected for an extended period and the loss can accumulate.

Does insurance replace internal controls? #

No. Insurance should complement controls such as:

• dual payment authority;
• independent verification of changes to supplier bank details;
• call-back procedures for unusual payment requests;
• segregation of duties;
• regular bank reconciliations;
• supplier and payroll controls;
• audit procedures; and
• access controls.

Policy terms can require specific procedures to be followed. Failure to follow them may affect a claim.

How can the cover be arranged? #

Crime or employee fraud cover may be included within another policy, offered as an optional section, or purchased as a dedicated Commercial Crime policy.

Availability and breadth of cover depend on the insurer, the business activities, financial controls, loss history, required limits and other underwriting information.

What policy conditions should be reviewed? #

Important points can include:

• what constitutes a direct financial loss;
• who is treated as an employee;
• discovery and notification periods;
• continuity dates and prior-known circumstances;
• limits, sublimits and excesses;
• required verification procedures;
• loss calculation and proof requirements;
• investigation and recovery costs; and
• interaction with Cyber, Management Liability and other policies.

How can Webber Insurance help? #

Webber Insurance can provide a high-level review of the business exposure, financial controls and available insurance options, then approach appropriate insurers and explain the proposed limits, conditions and exclusions.