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LE COURRIER DE SÉRAFIN is a section that twice a week presents a user’s personal finance question, followed by the answer of Sérafin, an artificial intelligence specializing in Quebec personal finance. Everything is accompanied by a validation comment or supplement from a financial professional.
Sérafin’s answer
Yes, it is possible to insure against this specific risk.
The first step would be to review your current policy to determine if you already have some protection. Look for sections of your policy that refer to “employee dishonesty”, “crime coverage” or other similar terms. These sections generally describe the scope of coverage for fraud committed by employees.
Do not hesitate to contact your company or broker directly. They can provide you with specific information about your coverage and whether your current policy includes employee fraud protection.
If your current policy does not cover employee fraud, ask about additional coverage options. Many insurance companies offer crime insurance or fidelity bonds as additional protection against such risks.
Before purchasing insurance, assess your company’s specific risks against the potential for internal fraud. Companies in certain industries or with certain operating models may be at greater risk of fraud. This assessment will allow you to evaluate your existing coverage and, if necessary, will guide you in what type of additional coverage to choose. The main coverages are:
• Employee Dishonesty Insurance: Covers financial losses resulting from fraud, theft or other forms of dishonesty committed by employees.
• Crime insurance: May include cover for losses resulting from fraud, theft, embezzlement or other criminal acts affecting business assets.
• Fiduciary Insurance: Protects against loss of assets entrusted to employees or third parties, such as in fund management.
Negotiation of the policy terms:
• Determine the amount of coverage needed based on the company’s risk assessment and assets.
• Review the policy’s exclusions and terms to ensure it meets your specific needs.
Preventive measurements:
Although insurance provides financial protection, it is equally important to implement internal preventive measures to reduce the risk of fraud.
These measures may include robust internal controls, regular audits and fraud awareness training for employees.
A business lawyer or risk management consultant can also advise on reducing the risk of fraud in your business.
Legal advice:
If fraud is suspected, it is advisable to consult lawyers to ensure that you take appropriate and effective measures, both from a business and legal perspective.
In summary, obtaining adequate insurance to cover your employee fraud risk requires a clear understanding of your specific needs, the options available, and a proactive approach to risk management. Contact an insurance broker to help you choose the best coverage for your business.
Answer from Charles-Antoine Carra, CPA
Fraud against businesses is becoming more complex, reinventing itself and multiplying. This fraud can come both externally (fraudulent e-mails, fake orders, etc.) and internally with the employee (among others: falsification of results, dissemination of company secrets, appropriation of amounts). Sometimes it’s a combination, while it could be external fraud facilitated by an internal employee. You only have to think of the infamous cases of SAAQ and Desjardins, where organized crime infiltrated thanks to an employee. Theft of personal data is actually a very common face of corporate fraud.
Fraud therefore takes different forms, but the result is the same: the affected company loses money and/or part or even all (eg Ashley Madison) of the public trust in it. In all cases, the company is affected, and its future may thus become darker.
As a company, have you put everything in place to ensure that an employee cannot cheat you? Know that your level of control will probably never be up to par, because the scammer will always be one step ahead: he is the one who imagines the scheme and triggers his plan when he knows he is in a blind spot. Kind of like a good old teenager who crawls out of his bedroom window when you least expect it…
In short, insurance against this type of crime has two forms to best cover the company:
1- Cyber insurance:
ALL businesses should have cyber risk insurance. ALL. Among other things, cyber insurance will not only protect the company internally against the damaging effects of fraud, but also against external lawsuits (damaged third parties).
2- Misdemeanor, crime or other similar name insurances:
Among other things, this insurance will make it possible to receive amounts that have been stolen not only by an employee over different periods, but also by malicious third parties.
If your current insurance policy may already include coverage for these two risks, be aware that it is generally limited and likely insufficient to fully protect you.
However, good employment practices remain the employer’s greatest ally. A well-treated, well-paid employee who sees a bright future with his employer will certainly be less inclined to cheat him. And when trust and good business practices aren’t enough, there will always be insurance… provided you’ve taken it!
Do you have other personal financial questions? Ask Sérafin and who knows, your questions might be published here!
