Fidelity and Crime Coverage
You know and trust the people who work for you, but that trust may be misplaced. After all, one third of all employees admit to stealing from their employers. And we’re not talking about the pens and paper: The median loss from employee fraud is $175,000.* Maintenance of strong, enforceable internal controls should be a priority for any entity. Yet those systems, no matter how well conceived, frequently fall short of stopping a trusted employee from engaging in fraudulent activity. In fact, the median time length of occupational fraud schemes is 18 months, and the number one way that an employer discovers a crime is by accident.* Travelers Wrap+ Fidelity and Crime Coverage provides an important backstop against the actions of a thieving employee. With this coverage, your company’s assets are protected at the time of a crime’s discovery, regardless of whether it occurred prior to or during the policy period.
Why you need protection
Employee dishonesty is costly and pervasive. In 2008, seven percent of business revenue was lost as a result of occupational fraud and abuse. When applied to the U.S. Gross Domestic Product, this translates to losses of approximately $994 billion.* And, when it comes to occupational fraud and abuse, your business’ size doesn’t matter — no business is safe. Statistically, small businesses only represent 38 percent of all frauds, but they are more vulnerable to loss. The median dishonesty scheme in a small business causes $200,000 in losses, an amount that exceeds the median loss for larger businesses.*
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.
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.
Payroll fraud – $1,900,000
A payroll employee had access to payroll checks and vacation checks. Over an eight-year period, the clerk issued duplicate checks on all legitimate employee vacation pay.
False payment – $1,600,000
In less than a year, a sales supervisor located outside of the United States caused a loss of $1.6 million to his employer. When customers legitimately purchased and received goods, the employee stole their payments for his own use. The employee attempted to cover up the loss by substituting fraudulent checks drawn upon other third party entities. The employer was underinsured, so insurance only paid $500,000, leaving the employer on the hook for $1.1 million.
Billing scheme – $167,000
Four employees colluded to defraud their employer through a phony billing scheme. The employees, including a supervisor, established fictitious vendors and submitted bills for work performed by other, genuine vendors.
*Association of Certified Fraud Examiners, 2008 Report to the Nation on Occupational Fraud and Abuse, www.acfe.com.