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Corporates’ Need For Crime Insurance Grows

Monday, April 27, 2015
By Mukesh Kumar

A cursory glance at newspaper is enough to realize that corporate frauds have been taking place at regular intervals in India. A number of hi-profile corporate frauds such as Satyam Computer Services, Reebok India etc. involving white collared professionals have gained media attention due to the large sums and the parties involved. However, most corporates witness frauds of relatively smaller magnitude that are not covered in the media, but are enough to affect the affect the involved companies’ reputation, and profits. Not surprisingly, in most such instances, companies’ own employees are involved, especially those trusted with managerial and supervisory responsibilities.

According to the KPMG India Fraud Survey Report (2012), the overall incidence of corporate frauds is rising in corporate India in the past years with as many as 80% of the survey respondents having experienced or suspected incidence of frauds, overall and specifically within their industry and company. Alarmingly, the average value of fraud loss reported by the survey respondents has crossed INR 1 crore (INR 10 million) in 2012 from an average of less than 1 lakh in 2008, indicating that India Inc. needs to deal with fraud risks firmly.

With rising complexity in the way the businesses are conducted, the risk of economic crimes or frauds has also undergone a change in the form in which they are conducted. Apart from the financial services, Industrials markets, Real estate & Infrastructure, Telecom, Information & Entertainment and Consumer markets are some of major sectors with high vulnerability of frauds, according to the KPMG India survey.  According to the KPMG survey, Corporate India’s unwillingness to see fraud as a strategic risk poses a grave threat as they start experiencing frauds of the future.

While a strong system of internal controls can help, a comprehensive coverage provided by a Crime Insurance plan takes the protection against the threat of a potential corporate fraud to the next level by providing a comprehensive coverage from a number of fraud types.

For a corporate, a standard Crime Insurance plan covers the following:
Employee Theft Coverage: Loss of money, securities or other property by theft or forgery by an identifiable employee of the Insured.

Premises Coverage: Losses from destruction, disappearance, wrongful extraction or computer theft of money or securities from the Insured’s premises by third parties.

Transit Coverage: Losses from destruction, disappearance, wrongful extraction of money or securities outside the Insured’s premises by a third party, while being conveyed by the Insured, an armored motor vehicle company or any person authorized by the Insured.

Depositors Forgery Coverage: Losses from instruments such as cheques fraudulently drawn on the Insured’s accounts by a third party.

Computer Fraud Coverage: An extension to cover losses sustained by the Insured due to computer fraud by a third party including cover for expenses incurred by the Insured due to a computer violation.

Despite sophisticated security systems employed by the corporates, the incidences of frauds have only risen in the past as fraudsters continue to invent new methods of committing such crimes. In most instances, the frauds are carried out by employees or those who have access to the internal systems of the corporates and it is not always easy to prevent frauds. These incidences cost companies a lot in terms of time, effort and money. The best protection that the corporates can consider amid such possibilities is a Crime Insurance.

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