NEW YORK, Nov. 27, 2018 /PRNewswire/ -- Hiscox, the international specialist insurer, today released the 2018 Hiscox Embezzlement Study™: An Insider's View of Employee Theft, which found that 79% of embezzlement cases involved two or more people. The study also revealed that 70% of embezzlement schemes were carried out for more than one year.
This is the fourth iteration of the annual Hiscox Embezzlement Study. The 2018 study surveyed a targeted group of chief financial officers and professionals in accounting or controller roles who have worked in a company where embezzlement has occurred.
"By surveying a select group of individuals who have experienced embezzlement firsthand, we were able to learn revealing information about the prevalence and impact of employee theft," said Doug Karpp, Crime & Fidelity Product Head at Hiscox. "This is a pervasive issue for companies of all sizes, and the goal of our study is to underscore the importance of having a plan in place to protect a business, its employees and its customers from the far-reaching repercussions of embezzlement."
The Real Cost of Embezzlement
The study revealed that the average amount embezzled was $357,650. Unfortunately, those companies only recovered 39% of the embezzled funds, on average. Furthermore, 39% of those who experienced an embezzlement saw more than one case in their careers.
When an employee is on the take, a company has much more at risk than just the funds being stolen. Nearly one-third (29%) of companies were forced to lay off employees as a result of an embezzlement scheme, and over one-quarter (26%) lost customers.
Embezzlers Behind the Scenes
Embezzlement comes in all shapes and sizes and can be difficult to spot, even cropping up where businesses may least suspect it. While the majority of schemes are carried out by a team of more than one person, the average embezzler had been an employee at their company for eight years, and 85% of cases were perpetrated by someone at the manager level or above. One-third of embezzlers worked in the accounting or finance department, and the most common method of embezzlement was billing fraud, used in 18% of cases.
How Businesses Can Protect Themselves
While the survey confirmed that businesses of all sizes, and in all industries, are vulnerable to employee theft, three-quarters of respondents said the companies where they currently work do not have insurance to cover embezzlement. Businesses should take the following steps to ensure they are covered in the event they are victimized by embezzlement:
- Prevent embezzlement before it happens by instituting a system of checks and balances. Small businesses, for example, are more likely to give end-to-end responsibility for a money-centric function such as payroll to a single individual, making it easier to steal and cover their tracks.
- Detect fraud early to keep a small instance from becoming a larger incident; knowing what to look for is critical in spotting an embezzler. In 65% of cases, the embezzlement scheme was uncovered by an employee, rather than an external whistleblower, such as an auditor, bank or law enforcement.
- Mitigate the impact to your bottom line by insuring your business and pressing charges against the employee who steals from your business.
Hiscox USA provides a variety of specialty risk solutions, including a broad spectrum of professional errors & omissions, general liability, cyber and data security, media liability, management liability, crime, kidnap & ransom, terrorism and commercial property insurance products.
In the US, Hiscox is headquartered in New York, NY, with offices in Atlanta, GA; Chicago, IL; Chesapeake, VA; Dallas, TX; Las Vegas, NV; Los Angeles, CA; Phoenix, AZ; San Francisco, CA and White Plains, NY.
A full copy of the 2018 Hiscox Embezzlement Study™ can be accessed at https://www.hiscox.com/documents/2018-Hiscox-Embezzlement-Study.pdf.
About the 2018 Hiscox Embezzlement Study
The Hiscox Embezzlement Survey was conducted by Wakefield Research (www.wakefieldresearch.com) among 200 US office professionals employed full-time in chief financial officer, controller or accounting roles, who have worked at a company where an embezzlement has occurred. The survey was conducted between October 11th and October 18th, 2018, using an email invitation and an online survey.
Hiscox is a global specialist insurer, headquartered in Bermuda and listed on the London Stock Exchange (LSE: HSX). Our ambition is to be a respected specialist insurer with a diverse portfolio by product and geography. We believe that building balance between catastrophe-exposed business and less volatile local specialty business gives us opportunities for profitable growth throughout the insurance cycle. It's a long-standing strategy which in 2017 saw the business deliver a profit before tax (excluding foreign exchange) of £93.6 million despite reserving net $225 million for claims in the most costly year ever for natural catastrophes.
The Hiscox Group employs over 2,700 people in 14 countries, and has customers worldwide. Through the retail businesses in the UK, Europe, Asia and the US, we offer a range of specialist insurance for professionals and business customers as well as homeowners. Internationally traded, bigger ticket business and reinsurance is underwritten through Hiscox London Market and Hiscox Re & ILS.
Our values define our business, with a focus on people, quality, courage and excellence in execution. We pride ourselves on being true to our word, and our award-winning claims service is testament to that. This information is neither intended nor should be construed to be a solicitation for the purchase of insurance by any US person or entity or as legal, business, or insurance advice related to the needs of any specific individual business or person. For further information visit www.hiscox.com.
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