Overview & Audience
Employee fraud has been a hot topic this year, for insurers seeking our insight and training. In this article, Paul Widger from Clyde & Co's Forensic Accounting Practice discusses the matters insurers need to be alert to, in order to restrict leakage.
Fidelity Guarantee insurance ("Fidelity") indemnifies employers for losses sustained as a result of employee fraud. A standard policy is triggered by "direct loss of money or goods as a result of any fraud or dishonest act by any employee" and therefore responds to a broad range of employee wrongdoing, from expense fraud to misstatement of accounts.
Prevention is better than cure…
Lax internal controls and lukewarm recovery policies create an environment where fraud can thrive. A zero tolerance culture and robust reporting and investigative procedures can go a long way towards dissuading would-be fraudsters. By exploring the insured's fraud prevention policy during the underwriting phase, insurers can identify and address vulnerabilities through risk improvement conditions and, where appropriate, endorsements, thereby reducing the number of frauds their insureds experience.
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