Insurance & Risk Management
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Fidelity / Crime coverage includes employee dishonesty, forgery or alteration, on premises, in transit, money orders and counterfeit paper currency, and computer fraud and funds transfer fraud.
Companies across all industries are relying more and more on outsourcing and the use of independent contractors and consultants to perform duties normally performed by employees. Common areas of outsourcing are clerical functions, accounting and information technology (IT) management.
Theft of physical assets (i.e. money or other personal property owned by a firm) is the most commonly covered peril under a Crime Policy. And theft via electronic funds transfer is on the rise, enabled by the widespread use of electronic communications to initiate such transfers. For example:
A company’s payroll supervisor logged on to the payroll account and noticed three payments totaling $104,632 had been wired from their account. The supervisor immediately reported the transactions as unauthorized. The bank shut down the account and was able to recover all but $38,781. Investigators found that the supervisor opened an email that he thought was from his bank, which allowed a computer virus to download onto the supervisor’s computer. The Hacker was able to read keystrokes from the insured’s computer, thereby enabling them to obtain banking and password information and initiate a fraudulent electronic wire transfer from the insured’s account.
An accounting manager and an assistant accounting manager of a firm forged authorized signatures on checks and altered documents. The two employees would issue a check to a vendor, but manually change the payee on the check to the name of a relative. Both employees were fired and the local authorities pressed criminal charges. The insurance carrier paid $72,000 to resolve the claim.
Information Theft is also on the rise. The theft of proprietary information and personally identifiable or protected health information of customers can often go undetected since thieves typically only take a copy of the information, leaving the original data intact.
The above situations are examples of 1st Party Crime coverage. However, Crime coverage can also include 3rd Party coverage. This would provide coverage to your clients, for example, if one of your employees stole money or property from your client’s site. Coverage for 1st Party Crime and 3rd Party Crime can be purchased separately or together. Many IT consultants are required to carry at least 3rd Party Crime coverage to satisfy contractual requirements when employees work on a client’s site.
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