When a business considers either insurance or loss control to protect itself from losses, the focus is usually on outside forces. Unfortunately losses may occur from inside a business just as easily as from outside. Whether your business has a huge percentage of hourly employees, mostly salaried, or a balance of both, you are vulnerable.
A major source of loss for many businesses is their employees. Ironically, the more trust an employer places in a given employee, the more vulnerable that employer is to suffering a loss. To protect itself from crooked employees, a business may need to purchase crime coverage.
A company’s greatest exposure to theft from employees lies with workers who are responsible for handling money (and similar property) and those who have significant access to company inventory. Therefore, a company that wants to evaluate its possible expense for purchasing crime insurance as well as to determine what control measures it should create to minimize theft losses, must properly classify its employees.
Classifying Employees
Employees in positions of greater trust (such as supervisors, managers and executives) usually have greater access to company assets. These workers are more expensive to insure because they can, potentially, create greater theft losses. These employees are often in a position, not only to handle money and securities; they usually handle company records concerning monetary transactions. They are often also in charge of benefit plans or have other fiduciary responsibilities.
Other employees can also cause problems. Consider persons, such as those in sales, product transportation and/or warehousing and supplies who have constant access to valuable company property. Because dishonest employees at this level deal with tangible items rather than money and securities, they represent a lesser threat but can still cause a substantial loss. A business that is evaluating its need for insurance coverage and for anti-theft controls MUST make thorough consideration of their type of business.
Please see part two of this article which discusses control methods. If you have questions about managing employee theft at your business and/or wish to explore crime coverage, please contact an insurance professional at The Flanders Group.