NEW England HVAC Insider Guest Column It's A Crime By Christopher F. Hawthorne CPCU, CRIS, CIC, LIA

To steal a line from an article written years ago, “If you’re in the right position, stealing is a cinch (1).” As you might recall, I wrote that when times get tough, fraudulent insurance claims light up.  The point of my prior article was to warn the business owner about being the victim of the impending rise in these types of insurance scams. During these times it is not uncommon to see a spike in direct crimes hit businesses and I have. The terrible thing about crime claims is that you know they are like mice. If you see one, you are probably just seeing only one of a larger community. The proverbial tip of the iceberg.  Over the past few months I have seen the following examples of crimes against businesses from one small town in Eastern MA:  • Two local contractors had their trusted office manager embezzle money out of the business accounts.  • Several contractors have been called and been told by the homeowner that one of their workers had stolen property.  • A local bank discovered a senior officer had been moving money out of accounts and into his own. This all from an affluent seaside residential town of fewer than 20,000!  When considering what it takes to generate any level of income in these times, never mind reputations, losses associated with crime are unnerving. Over the past 15 years when I review coverage's with business owners, crime is not a real concern to most. In fact, I typically get the “you are trying to sell me more insurance look.” Typically, the only crime coverage purchased is to satisfy ERISA requirements.  Therefore this article is designed to raise the issue of crime and to alert you to what your exposures might be and the actions you can take to protect yourself. Starting with the basics, please note that the package policy (property and liability) if written on an, “all-risk” basis does provide for theft coverage for your business personal property stolen from a premises named on the policy but not for money and securities. Additionally the policy does not cover any theft by employees.  So who needs crime? Any business with money and securities at the premises or in a bank and all businesses with employees. Comforting. When considering the issue of crime, many think of a stranger breaking in and taking something, yet it is most often someone you know. More importantly it is often some one who knows you well. Typically crimes against businesses come from a trusted player in the organization.  When considering crime coverage for insurance protection, what exactly does crime mean? Theft, Burglary, Robbery, Mysterious Disappearance, Fidelity, Identity Theft, Forgery, Extortion, Employee Dishonesty, Hacking, Fraud, Kidnap and Ransom? Crime coverage could mean any or all of these terms. For smaller businesses, carriers may provide a small amount of what they call crime coverage. Normally they are referring to Employee Dishonesty and typically in a small amount such as $10,000, $25,000 or $50,000.  Crime coverage can be broken into specific types of crimes such as robbery and safe burglary, employee dishonesty, forgery and alteration or any of the crimes listed above. Often the amount stolen far exceeds the minimal limits offered at no charge by the carrier.  An article of this length can not tackle the issue of crime thoroughly other than to call your attention to the issue and ask you to know what you have or more importantly what you do not have for coverage protection and what you can do to help increase your odds against the bad guys (& gals).  The first step is to talk with your agent about this issue every year. Be open to the possibility and be creative when imagining what could be stolen. Realize that even your best employee could be capable of stealing from you. In fact it probably will be your best employee or at least the one you count on the most. Review with your agent the assets that could be stolen from you. Cash, inventory, computers, investments, reputation, fuel, clients, business files, personal information are all items of value that can be taken. Build a plan on how to protect yourself from any of these crimes occurring in the first place. Then determine what is needed to allow you to recover if any you fall prey. Story continues below ↓ advertisement | your ad here

You can do many things to lower your chances of loss with simple and low cost tools. The most effective tool is to have two sets of eyes see all financial activities of any employee, be it balancing the check book, gas cards, deposits, check writing, etc. Devise a system where things have to tie out in two different ways with different people in charge of the different outcomes.  A small business with a book keeper might enlist the help of a spouse to double check critical numbers and a larger concern might have other employees trained to double check one another’s work. Please consider bringing your accountant into the process if they are not already involved. A CPA is trained to spot irregularities.  In addition to financial checks and balances, do not over look the obvious. GPS, Drug Testing, CORI checks and mandated two week vacations for financial employees are great tools for catching obvious criminal activities.  While on the subject of crime, another form of criminal activity is arriving. Financial Planner John Lindahl (2) reports, crooks have broadened their targets on theft. Along with financial identity theft by hackers, phishers or employees, we now need to be vigilant for the latest move – Medical Identity Theft. According to a World Privacy Forum study, a social security number brings approximately $1 on the street while a medical identity number brings $50.  While traditional identity theft can cost you time and money, medical theft can cost you all that, plus your life. The next time you enter the hospital for a procedure, will all the information in the records be yours? Monitor both types of ID theft through regular checks of your credit reports. You are allowed one report from each of the big three (TransUnion, Equafax & Experian) per year at no cost. If you have been a victim of medical identity theft contact the police to file a report. For additional resources and information, check out the World Privacy Forum at www.worldprivacyforum. org/medidtheft_consumertips. html. B ad guys will never stop trying to cheat you, but we know this. Our job is to take time to consider all the points of entry the bad guys have and stop them at the pass and be prepared to recover if they get through. Always remember we do not know who the bad guy is! Knowing what is vulnerable, what tools you can use, working with a knowledgeable agent and purchasing the proper insurance will go a long to helping you avoid and survive those who wish to take advantage of you. I hope you find this helpful.?  (1) The author if this line is unknown. (2) John Lindahl, Select Planner, Private Wealth Services Group, Sagemark Consulting, 7 Essex Green Drive, Peabody, MA 01960  Chris Hawthorne represents Thomas Gregory Associates and has specialized in working with contractors since 1995 for their insurance and risk management. Chris can be reached at 781-914- 1038. If you have questions or have issues you would like addressed in future articles or wish to find prior articles, please contact Chris at 781- 914-1038 or chawthorne@thomasgregory.com.                                                            ###