White collar crime is rampant, but hardly gets punished or even noticed. It can cost your insurance agency hundreds of thousands each year.
You may trust your insurance agency staff because they have always been loyal to you and your company. And the reality is that a majority of your employees are loyal and trustworthy, hard-working individuals. Your issue with white collar crime is catching the one or two individuals who think they are cunning because they can cost your business hundreds of thousands each year. Here are a few things you need to know about white collar crime.
Why Employees Turn to the Dark Side
Not all thieves start out as thieves, there are often internal and external factors that lure them to the dark side. They justify their theft thusly:
- Pressure: If your employee thinks they are in a dire financial situation, they may believe their issues will be solved by additional funds. Debt is the most common issue your employee may face.
- Opportunity: Your high-management employees are likely to have access to secure files, which offers them an opportunity to fix the books and cover up their crime.
- Capability: The perpetrators must have the knowledge to pull off such a crime.
- Rationalization: Humans are great at rationalizing their actions. In the case of employees, they may feel like they are underpaid or say they are not treated well.
More than 80 percent of thefts occur at companies that contain less than 150 employees, and just under half of these crimes are committed at companies with less than 25 employees. You may believe that your insurance agency is too small to fall victim to such crime, but reports show that is not the case.
Most Common Fraud Schemes
Your insurance agency may fall victim to any one of these five common fraud schemes:
- Payroll fraud (7 percent): A high-level employee believes they are underpaid and uses the payroll system to divert funds to themselves.
- False billing (10 percent): Occurs when an employee creates a fictional invoice or inflates invoices from real vendors or clients and pockets the difference.
- Credit card fraud (12 percent): This happens when an employee fraudulently uses an employer credit card.
- Check fraud (26 percent): An employee alters or forges a check from a client or vendor.
- Outright fraud (36 percent): This occurs when an employee outright steals cash or bank deposits and transfers them into their own account.
How to Prevent White Crime
- Never leave one employee with full responsibility for accounting or accounts payable.
- Note dramatic employee lifestyle changes.
- Educate employees about detecting fraud and the very real consequences of being caught.
- Promote a culture that centers around trustworthiness and integrity.
- Conduct lawful background checks and speak with any potential employees about any red flags that appear on their background check.
Protect your insurance agency with the right insurance policy. At PMC Insurance Group, we’re experts on small business insurance in MA and can help you put the proper policies in place. To learn more about getting competitive coverage for your small business clients, contact us today.