Embezzlement and crime:
Embezzlement and crime insurance covers damages caused by employee embezzlement or attempts to cause damage by third parties that are not covered by other insurance policies, such as property insurance or financial insurance.
The following coverages are included in the policy:
- Loyalty insurance – damage to the insured by a first party (employee).
- Employee dishonesty insurance – damage to a third party by a first party (employee).
- Theft insurance – damage to the insured by a third party.
- Crime and embezzlement insurance – +1+2+3 damage to a third party by a third party.
The essence of the coverage is damage caused by an employee or a third party who acts with a view to obtaining a personal benefit for themselves or their relatives and to cause damage to the company.
The policy is based on the filing of a claim and covers damage discovered during the insurance period, even if the embezzlement began months or even years before. This is a great advantage since experience shows that most of the embezzlements are not one-time acts but rather are a series of small damages carried out over time by the same person.
In addition, the policy covers the parent company and all its subsidiaries in the past, present and future. This policy is especially essential for companies that are spread over a large geographical area, are involved in different activities or carry out a large number of projects. All these make the management’s oversight and ability to control and monitor more difficult and therefore create more loopholes for employees and managers in the various activities.
Based on existing experience, embezzlement by employees is usually carried out by longstanding and experienced employees who know the company well. Usually, the embezzlement is carried out slowly over a long period of time and in small amounts so that the accumulated damage may be large. This of course depends on the length of time between the beginning of the embezzlement process and until its date of discovery.
The risk of employee embezzlement in the company increases when the geographic distribution is wider, with a large number of subsidiaries, and especially when the subsidiaries are located in different countries around the world.
In the process of underwriting and purchasing of the insurance, the company is asked to fill out a questionnaire in which it is asked to provide information regarding their control over processes relating to inventory and financial management and internal procedures demonstrating control over recruitment and headcount management.
The premium for the liability limit of $1,000,000 will usually range between $5,000 and $30,000 for a commercial company. The premium is determined by taking into account the whole range of risks and among other things: the company’s sales cycle, their number of employees, the distribution of their subsidiaries around the world, their field of activity, damage experience in the past and more.