Crime and Kidnap & Ransom Exposures & Product Solutions
May, 2 2013
Meet the Presenters Rob Hanson • Senior Underwriter • Crime and Kidnap & Ransom Subject Matter Expert •
[email protected] Yianni Fountas • Crime and Kidnap & Ransom Underwriter •
[email protected]
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Crime Agenda • • • • • •
History of Crime Insurance Why and How Fraud Occurs Crime Loss Statistics Areas of Exposure/Key Problem Areas Chubb’s Crime Coverage Basics - What is Covered Underwriting Considerations: – –
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Target industry classes Red Flags
Underwriting Requirements Claims Scenarios Questions
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History of Crime Insurance •
Has its roots in fidelity bonds from the early 1900s (private households)
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1930s saw the start of fidelity bonds for commercial companies
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1986 Commercial Crime Policy was born
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2000 onwards saw policy broaden out to also include
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crimes committed by non-employees
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crimes committed by employees against clients
Crime can be purchased on a stand-alone basis
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Crime Risk Analysis Why Fraud Occurs 1. Opportunity 2. Motivation 3. Rationalization
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Crime Risk Analysis Opportunity • Mergers, Acquisitions and Divestitures • Rapid Expansion • Downsizing or Financial Problems
• Inadequate Supervision • Inadequate Segregation of Internal Controls • Too Much Trust
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Crime Risk Analysis Motivation & Rationalization • Entitlement • Attitude • Downsizing
• Poor Moral • Personal Problems • Societal Values
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Impact of the Economic Crisis • Fraud by long-term employees is increasing: Employees who have worked at company – >5 years account for 66% of total losses 1 – >10 years account for 33% of losses 1
• Fraud committed by employees acting in collusion surged from 32% in 2007 to 61% in 2011 1 • Collusion leads to larger losses – median loss in collusion schemes is $250K vs. $100K for single perpetrator schemes 2 1. KPMG 2011 Report 2. Association of Certified Fraud Examiners 2012 Report
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Smaller Companies Are at Greater Risk • Weaker internal fraud controls cause greater vulnerability to crime losses • 32% of frauds against small businesses (