Why Fraud Insurance Is Indispensable in This Digital Age

Businesses may need to file insurance claims for loss or damage of property, and the entire claims processing could be a complex and long-drawn out one. Insurance transcription involves transcription of recorded conversations regarding insurance claims that is needed for claims processing, legal purposes, and future reference. A common form of insurance claim made by businesses is that related to employee fraud. Organizations use professional transcription services to transcribe their claims related recordings into comprehensive transcripts that help adjusters and fraud investigators evaluate insurance claims.
Why Fraud Insurance Is Indispensable in This Digital Age

Employee Fraud – a Major Issue

According to the US Chamber of Commerce, American companies lose between $20 billion and $40 billion each year due to employee theft. Employee theft or dishonesty is a major issue faced by almost every organization. Tech-savvy employees, electronic transactions and other conveniences offered by this digital age make it easy to engage in fraud and keep it under cover. Therefore it is important for every organization to have fraud insurance that is designed specially to protect your business against employee fraud. Employee fraud can be two types, theft of property which means theft of company property, from office supplies or inventories and the second is misappropriation of money such as embezzlement of company funds like payroll frauds, unauthorized transactions, and misuse of credit cards among others. With fraud insurance policy, financial losses caused by the criminal acts of your employees are insured. It helps in avoiding cash flow issues and secure business profitability.

The Sedgwick County Example

A typical example of employee fraud, misappropriation of funds, is that which occurred in Sedgwick County recently. The County officials filed an insurance claim and a property loss notice within a week of discovering that they had lost more than half a million dollars to fraud. According to reports by The Wichita Eagle the county lost around $566,088.90 following fraudulent activity supposedly by an employee. This huge amount that was paid as electronic payment to a Wichita construction company never reached the company. It went through the automated clearing house (ACH), which is the electronic network for financial transactions in the US. This network is used by governments and businesses to batch transactions together to pay for things like business transactions, benefits, bills and payroll. The county could not however, release the details of how the loss occurred because it could interfere with the ongoing criminal investigation by the sheriff’s office and the FBI.

In such cases involving fraud, the insurer would need all details and the organization will be required to provide a complete description of the circumstances up through the loss discovery. The organization that is victim to fraud will have to provide a statement, which is usually recorded and entered into the investigation report. This is what makes claims statement transcription very important. Other recordings that are transcribed by a digital transcription service serving the organization include field investigations, telephonic conversations, and general correspondences. Witness statement recordings are also important, and are considered a critical element of the investigation.

Unfortunately, a large percent of employee fraud goes undetected. A single employee or a group of employees may be involved in the theft. The fraudulent activity can take place over several years, bringing huge losses to the company.

Fraud Insurance – Major Considerations

Why Fraud Insurance Is Indispensable in This Digital Age
There are insurance policies available that protect businesses from employee fraud. Some policies automatically include crime coverage but many companies are still underinsured for losses from theft. Here are some the steps that organizations should take if they discover/suspect employee fraud.

  • Identify whether their insurance policy covers crime losses due to occupational fraud or employee theft.
  • File a timely proof of loss with the insurance company. Generally, the companies require the insured to notify them when there is a loss. Filing a claim in a timely manner will ensure that it is reimbursed under the policy.
  • Conduct a thorough and accurate investigation which will minimize the chances of destroying evidences. Check if the insurance policy covers the cost of investigation and claim preparation.
  • Hire someone who is an expert in getting confessions and have all witnesses interviewed individually and document the interviews.
  • It is important to ensure that the investigation satisfies the “manifest intent” clause which is important for covering crime losses due to employee theft. This clause specifies that the employee theft has the “intent” to wrongfully rob the company of money or property.

Dealing with employee fraud can be very challenging. In the present digital age you have technology-savvy, more educated employees who have greater access to your sensitive company data. There is no way to tell who will engage in fraudulent activity, and it may be quite late by the time it is discovered. Employee fraud cannot be completely avoided. However, as the business owner what you do immediately after discovering/suspecting fraud and the type of fraud insurance you carry are very important when it comes to recovering losses.

About MOS Legal Transcription Service

Headquartered in Tulsa, Oklahoma, MOS Legal Transcription Service is a legal transcription company providing quality legal transcription services for lawyers, attorneys, law firms, law companies, paralegals, and other legal professionals across the US.