By Toni Nuernberg, CAE
Published: December 20, 2007, Collector Magazine USA

Commercial crime insurance can protect your business against employee theft and fraud.
"My employees would never steal from me!"

While every employer wants to believe this statement, unfortunately employee theft and dishonesty happen far more frequently than you would like to think.

The Association of Certified Fraud Examiners (ACFE) estimates that businesses lose 6 percent of revenues each year to fraud, and small businesses are the most vulnerable. It's no longer a matter of if you will experience a crime loss, but when.

Often, clients will contractually require a collection agency to carry employee dishonesty or fidelity coverage. They want to know their funds will be protected in case of theft by your employees. However, regardless of client requests, commercial crime coverage should be an important part of your risk management strategy.

Right about now, you're probably thinking, "We're just a small business. Theft only happens to large companies." ACFE challenges that notion and cautions that small businesses are the most vulnerable to theft.

According to a study conducted by ACFE, "Most employee fraud is committed by first-time offenders. Only 12 percent of the offenders studied had a previous conviction for a fraud-related offense. Most frauds are committed by honest employees."

ACA International recently received a call from an association member with fewer than 10 employees in his company. The company's bookkeeper of 33 years had recently retired, and the member promoted someone with five years experience in his company. Within a year and a half, the new bookkeeper had embezzled tens of thousands of dollars. Though she was arrested and convicted, the agency owner had very limited coverage for this type of loss. In light of the statistics and stories, commercial crime coverage is something you should seriously consider to protect your business.

What should you look for when considering commercial crime coverage? It's important to be able to choose varying policy limits and tailor a policy to meet your specific needs. The following are some of the key policy considerations:

Employee Dishonesty (Fidelity): Provides protection against loss caused by employee dishonesty, including money, securities and other property.
ERISA Employee Dishonesty: Provides a limit equal to employee dishonesty protecting your 401(k) or pension plan to meet ERISA requirements.
Forgery or Alteration: Protects against loss resulting from a third party forging or altering an outgoing check, draft or similar negotiable instrument.
Money, Securities and Other Property On- and Off-Premise: Offers coverage for loss of money and securities through theft by a third party, disappearance or destruction while on the premise or in transit. Can also provide coverage for loss of property caused by a third party while on the premise or while in transit.
Computer Fraud: Provides protection for loss of money, securities and other property caused by third parties through computer fraud.
Funds Transfer Fraud: Provides coverage for fraudulent wire transfers from your transfer account at your financial institution.
There are other coverage options that you should consider as well, such as:

Money orders and counterfeit currency.
Computer program and electronic data restoration expense.
Personal accounts protection for specified management staff.
Claims expense.
We all want to believe our employees are honest, hardworking individuals. For the most part, they probably are. But desperation can make good people do dishonest things. Unforeseen tragedy or catastrophic events can put people in circumstances they've never been in before, and "borrowing" money with the intention of putting it back is a story commonly played out in the courts and press.
ACFE estimates that 30 percent of business failures result from fraud. Although commercial crime insurance can not prevent employee fraud or theft, it can provide important protection for your business and clients.

Toni Nuernberg, CAE, is chief operating officer of the ACA International Holding Company.

The contents of this article do not alter, amend, modify or supersede the terms and conditions or requirements of your insurance policies. The policy language will govern in the event of a loss and should be reviewed in its entirety.

ACA International's for-profit subsidiary, Collectors Insurance Agency Inc., can assist ACA's collection agency members with all of their risk management needs including E&O, Business Package and Work Comp, Commercial Crime, statutory bonds, client bonds and licensing. To contact a representative, please call ACA at +1(952) 926-6547.