Employee Theft

Chadwicks offers the most comprehensive employee theft insurance in South Africa. This insurance cover is more commonly known as Fidelity Guarantee. The risk exposure to the business is loss of money or property belonging to you or for which you are responsible stolen by an Insured Employee or Direct Financial Loss as a result of Fraud committed or Dishonesty of an Insured. In more simple terms, this policy will indemnify you against direct loss of money or goods caused by an act of theft by an employee. The potential loss can be finically debilitating, so Chadwicks strongly recommends businesses insure this risk.

Fidelity Guarantee

Employee Theft Cover

This insurance cover is more commonly known as Fidelity Guarantee. The risk exposure to the business is loss of money or property belonging to you or for which you are responsible stolen by an Insured Employee or Direct Financial Loss as a result of Fraud committed or Dishonesty of an Insured.

In more simple terms, this policy will indemnify you against direct loss of money or goods caused by an act of theft by an employee. The potential loss can be finically debilitating, so Chadwicks strongly recommends businesses insure this risk.

Overview

Employee Theft

As well as theft, the policy will essentailly cover any other act of fraud or dishonesty by any employee provided that this was committed with the clear intent of obtaining an improper personal gain either for himself or for some other person or organisation. It is not intended that the insurance policy should pay where loss results from an employee merely exceeding his authority or disobeying instructions.

Definition of Employee

Generally defined as being a person under a contract of service or apprenticeship with the Insured but excluding Directors, Partner & Members unless they are also Employees (as defined in the policy wording).

The Risk Exposure

Why and Who Should You Insure?

Recent statistics released by Ernst and Young have revealed that, over a period of three years, 70% of the South African business surveyed have been victims of fraud of which a staggering 90% was perpetrated by their own employees who have inside knowledge of how to circumvent the companies existing internal controls. The law of averages are therefore stacked against you if you have not had a loss of late. Of course the other reason for an insurance claim-free history is that your financial loss has passed by undetected due to inadequate risk management (internal procedures/audits/systems) being in place or due to inept auditing reviews (auditors should review this aspect of their clients business as a matter of course).

The King Code Reports and Companies Act has further imposed more onerous duties on Directors & Officers in terms of the performance of their duties. Failure to arrange adequate insurance cover is an exclusion on most Directors & Officers Liability policies and thus uninsured losses in terms of employee theft/fraud may well result in the unfortunate Director or Officer being held liable for the companies financial loss in their personal capacity.

We strongly advocate that all employees be covered on a blanket basis as more than often a loss is perpetrated by so-called low risk employees. These low-risk employees often work in cahoots with the high-risk employee. There is no cover if your insurance policy is structured on a Named Employee basis when a loss emanates from collusion between a Named Employee and any other unnamed employee.

Setting Your Cover

Limit of Indemnity

Only you are in a position to assess the limit of indemnity in terms of all the possible exposures that exist in your business. The limit chosen is the maximum insurers will pay for insurance claims arising out of any one occurrence of theft continuing throughout the period of the policy.

An important fact to note is that very often the fraud may continue undetected for many years and consequently, when discovered, results in a severe financial loss to the company.

The following factors should be taken into account when determining your limit of indemnity:

the nature of your business
high staff turnover equates to high risk
your current internal risk management practice i.e. audits/systems/controls
the possibility of collusion between employees
the extent of your interactions with suppliers/customers
your estimation of how long fraud may continue undetected

Employee Theft Insurance

Claim Examples

Bogus Employees
Bogus payments to service providers
Collusion with suppliers or customers
Bank Deposits, Teeming and lading fraud
Cheque and Credit Forgery
Collusion with suppliers or customers
Stock Control System
Fictitious Sub-Contractors
Outsourced activities (are security guards your employees etc)
Computer and fund transfers frauds
Extortion
Counterfeiting of documents (e.g. Bill of lading)

General Information Only

Chadwicks provides general information about insurance. The cover suitable for you depends on your contractual responsibilities and specific risks and is determined by the policy wording, schedule and endorsements, including all relevant terms, conditions, exclusions and limits. Please review these documents with your broker or insurer before making any insurance decisions.