Recently, us Insurance Brokers were reminded of the risks and financial implications to business recently when Insurer Dual Australia were hit with a $17 Million Fraud when their claims manager paid legal costs to a bogus Law Firm set up by her husband. While they are confident they will recover most of the funds stolen, it has further ramifications to businesses with loss of morale to staff due to the embarrassment and shock of the event. However for the business itself, it has the potential to damage their brand image. The Managing Director has fallen on his sword after lauding their recruit to the market previously. To us Insurance Brokers, we are certainly concerned if there is a reduction in the premium pool to pay claims and this may increase pressure to this insurer to increase premiums because their claims results are affected.
All our businesses are exposed to such risks, both internally and externally. Previously we have discussed the growing Cyber Risk threat and the ability for external breaches of Business systems being able to steal from their bank accounts or clients accounts. However, internally we are at risk too. All of our businesses need to be prudent and careful with how we recruit our staff into trusted positions, have systems for checking and double checking and appropriate sign off on financial transactions, regular audits of systems and not be afraid to ask appropriate questions whenever there are discrepancies in Accounts. There is Insurance cover such as Commercial Crime covers and Employee Dishonesty sections in Business Packs, but high limits have large premiums. We need to manage these risks with other methods too.
So what can you do to reduce or prevent fraud?
There is definitely a relationship between those companies that implement stringent anti-fraud systems and those that experience considerably lower losses and time taken to discover a fraud.
There are a number of prevention tips we can provide. Some of these methods include the following:
In relation to these methods, Managers should be aware how the following inter-relate
The cost to Brand reputation as well as the financial losses to an organisation can be very damaging. Almost half of the victim organisations are unable to recover their losses so , proactive measures to prevent fraud are critical. Management should continually assess their specific fraud risks and review its fraud prevention programs in light of these risks. It could make a difference to your survival.