Some people are honest; others aren’t. This is true in every area of life – and today’s business world is no different. Whilst most employees are diligent and trustworthy, a few individuals are more than willing to rip off their employers for personal gain.
Knowing if an employee is on that level is extremely difficult. Whilst a theft can have a big impact on the business, it’s necessary to take a leap of faith in every hire. This is where Fidelity insurance comes into play.
Below, we’ve outlined what it is, where it can be found, and how it can help if the worst happens.
What is Fidelity insurance?
Fidelity insurance is a type of cover that protects a business from things like fraud, theft, or misuse of company assets by employees. Here’s an example of how it could step in to support a business, reducing the impact of the loss:
On completing a recent audit of your company’s accounts, you notice a number of small, unusual transactions where money has been transferred from the company account to an unknown external account. Digging a little deeper, you discover that these transactions are to a personal account of an employee on the Accounts Team.
When you confront the staff member, they admit that the funds were taken without permission, and used for personal gain to the tune of £10,000 – a significant sum.
It’s important to point out that in this scenario, Fidelity cover would only offer protection for theft by an employee (i.e. someone paid a salary for their services to the company). So volunteers, for example, may not be covered.
Is this just for financial losses?
Not necessarily. Fidelity insurance can also step in to protect against acts of theft of property, or even forgery. Take the following example:
You’re a business owner running an IT firm. Due to the nature of the work, the office is largely filled with expensive computers and electrical equipment. Over the last couple of months, you’ve noticed that pieces of equipment have been going missing without explanation.
Whilst investigating, you check the CCTV and spot a team member taking equipment from a storage cupboard on their breaks, and taking it home at the end of the day.
Note that in this example, Fidelity cover would only offer protection for theft of property where the property/contents are insured under the current policy.
Is it already included in my policy?
That depends. Some insurers automatically include certain Fidelity insurance – it can be found under various types of policy, from Professional Indemnity to Office Packages, so be sure to check the small print.
Other insurers may offer it as an optional extra attracting an additional premium, and some may be unwilling to offer it at all. In circumstances where insurers aren’t willing or able to offer this cover, it’s up to the business to consider a stand-alone Fidelity policy, or the wider full Crime products.
Is cover standard?
No. The cover itself can vary in many ways, from the maximum amount insured, to how promptly an incident needs to be notified. This is why it’s important to understand the details of your policies. One constant with all policies is that any claims require the business to report the incident to the police, in the same way they would for a theft.
This can be an issue for some businesses, as the embarrassment of admitting they’ve been defrauded can be significant. Therefore, it’s not uncommon for an organisation to absorb the loss, sack the employee, and avoid claiming.
Do business owners need it?
There’s generally no legal or statutory obligation to hold any form of Fidelity insurance, but it is needed in certain industries within the financial services sector (such as for companies involved in open banking). However, just because there isn’t a legal obligation, doesn’t mean the insurance shouldn’t be taken. As a director, you have a duty to protect your business against issues that may arise.
The risks, and therefore the subsequent value of this insurance, is especially high for companies who process many financial transactions, or hold a lot of expensive equipment on site. Fidelity insurance reduces the risk to the business, as well as to the individual director for allegations of ignoring key financial risks should the worst happen.
How RiskBox can help
If you’re unsure whether you have Fidelity insurance within your current policy, or you’d like to get a quote to protect against this risk, get in touch today.
Speak to our friendly team by calling 0161 533 0411, or fill in our online contact form and we’ll get back to you.
Uncategorized - November 7, 2022
Blog - October 31, 2022