CRIMESTAR commercial crime from a different angle
CRIMESTAR commercial crime from a different angle THE IMPORTANCE OF BROAD COVER FOR DIFFERENT TYPES OF FRAUD The motivation for fraud is triggered by a growing number of complex factors, not just pure unadulterated greed. This in turn creates a more tenacious and determined fraudster whose methods are increasingly elaborate. Therefore, the need for an all risks approach to your Crime insurance buying philosophy is essential. CRIMEstar meets this need. Mark Smith, QBE Most conventional Commercial Crime cover uses theft as well as specifically defined frauds and other types of loss to the policyholder s property as its starting point. This approach does not necessarily address all the scenarios which commonly occur and can lead to uncertainty and potentially gaps in your cover. Rather than seeking to identify and define specific categories of covered crimes, CRIMEstar: >> Takes its trigger point from the loss you suffer as a result of any type of dishonest activity and provides the broadest based protection for this most widespread range of economic crimes. >> Includes protection for criminal damage, extortion by detention of your employees and additional limits for your associated costs. >> Makes no distinction between computer-based and paper-based frauds, nor does it draw any distinction between criminal damage caused to physical property as opposed to that caused to information stored on computer systems. It also covers crimes regardless of whether the perpetrators are your employees or others. These innovations are unique to CRIMEstar and really matter because they can greatly reduce the potential for friction in the claims settlement process. On the coverage front, that s basically it. Using the same simple and transparent approach to policy wording which we followed in our award winning Directors & Officers liability insurance DARCstar, we have created a nine page CRIMEstar policy that is written on an all risks basis. CRIMEstar has been created by Willis FINEX Global, in association with a group of highly rated insurers including:
how IS CRIMEstar DIFFERENT FROM OTHER COMMERCIAL CRIME COVERS? WHAT IS COVERED? Definition of fraud. CONVENTIONAL COMMERCIAL CRIME INSURANCE Usually involves lengthy definition with built in sub-definitions. CRIMESTAR Broad and simple dishonesty based test. Losses caused by fraud. Distinction for coverage purposes between internal fraud (employees) and external fraud (third parties). All types of fraud covered. Crimes involving damage to or theft of property. Distinction is generally drawn between computer-based and paper-based fraud with different coverage outcomes. No such distinction is drawn. Entities acquired during the policy period. Threshold restrictions generally imposed as to size of entity acquired. Full cover regardless of size or number up to 100% of the asset size of the policyholder. Nature of cover for entities sold during the policy period. Cover ceases from point of sale. Cover continues from point of sale for those crimes committed prior to sale and discovered for up to one year post sale. Proof of Loss costs and procedures. Costs often sub-limited and no scope for claiming post discovery loss. Additional limit available to prove potential claims and ability to claim post discovery loss. Additional CRIMEstar features include: 1. A simple one page proposal form and full retroactive cover. 2. Automatic cover for all/any subsidiaries, joint venture companies or associated companies acquired during the period of insurance up to a threshold of 100% of the gross annual turnover of the policyholder. 3. Automatic cover for crimes committed in any subsidiaries, joint ventures or associated entities before they are sold or otherwise divested by the policyholder if discovered and reported up to one year after sale or disposal. 4. Renewal stability extension providing for up to two automatic renewals without the completion of a fresh renewal proposal form. From a Risk Management perspective implementing controls and procedures are crucial to the prevention of fraud in these newly acquired or merged entities. This is made all that more difficult with businesses looking to expand into emerging markets with operations further from head office. CRIMEstar gives clients that essential cover that they can pursue their acquisitions knowing that they will have the benefit of the most generous of acquisition thresholds. Oliver Wheeler, AXIS commercial crime from a different angle 3
CRIMESTAR commercial crime from a different angle HOW CAN CLAIMS ARISE? The main categories of fraud are: Skimming Diversion of funds belonging to a company, prior to the recording of such funds in the company s accounts (e.g. customers payment directly into the hands of a company s employee). Embezzlement Diversion of funds, assets or stock from an organisation s accounts, either in the form of cash or cheques or by the raiding of bank accounts. XXXX Payroll fraud These are similar to procurement frauds in as much as the fraudster is instrumental in having the company pay for work that has not been performed. Effectively the fraudsters commit ghost pay-rolling i.e. falsifying time worked, or falsifying commission schemes involving fictitious sales or altered commission rates. Cheque/bank transfer tampering Frauds perpetrated by persons having access to the company s cheque books, electronic payment or bank systems. These frauds involve forged signatures and transfer approvals, altering of payee details, or payments into a new account opened by the perpetrator of the fraud, but in the same name of a genuine payee. Expense schemes This is where the perpetrator of the fraud misclassifies, overstates, or claims fictitious expenses. Stock & physical assets Stock manipulation fraud, i.e. misuse or misappropriation of company property, or simply the theft of a vehicle, stock or supplies or computer equipment. The man who is admired for the ingenuity of his larceny is almost always rediscovering some earlier form of fraud. The basic forms are all known, have all been practiced. The manners of capitalism improve. The morals may not. Thomas Jefferson Bribery and corruption Collusion between vendors and employees, either by inflated invoicing by the vendor in return for kickbacks to the conspiring employee or bid-rigging (i.e. the promise of a bid to a particular vendor instead of to the lowest bidder). Collusion between vendors and employees, either by inflated invoicing by the vendor in return for kickbacks to the conspiring employee or bid-rigging (i.e. the promise of a bid to a particular vendor instead of to the lowest bidder). All of these types of fraud can and often are committed by a combination of computer based, paper based and other dishonest means. They are often perpetrated by your own employees either acting together or with others. By stripping away the coverage distinctions between both the means of committing the fraud and the individuals responsible for them, we believe we have simplified and enhanced the cover. 4 commercial crime from a different angle
Automatic divestiture cover Broad definition of property for criminal damage cover Eradication of distinction between employees and others Automatic acquisition cover 10KEY FEATURES proposal process Simplified and streamlined CRIMESTAR trasimple and nsparent terms Additional limit for proof of loss costs Fully retroactive cover from inception Broad dishonesty based definition of fraud without renewal proposal Option for two automatic extensions commercial crime from a different angle 5
CRIMESTAR commercial crime from a different angle FAQS >> WHAT IS CRIMEstar? CRIMEstar looks at Commercial Crime insurance from a different angle. It starts from the premise that all direct financial loss suffered by companies as a result of crimes of dishonesty and criminal damage are covered. It aims to provide broad and relevant cover in concise and easily understood terms. It is nine pages long. Conventional Commercial Crime insurance is complicated. Policies tend to be twice or three times the length of CRIMEstar and contain numerous insuring clauses and definitions. >> HOW CAN A NINE PAGE WORDING BE ANY BETTER? Conventional crime cover adopts an insured perils approach to cover i.e.: these are the specific crimes for which you are covered and here are the terms on which cover is granted. This approach can breed uncertainty and complexity. By contrast, CRIMEstar adopts an all-risks approach i.e. unless excluded it is covered. >> WHAT IS DIFFERENT ABOUT CRIMEstar? Consistent with the all-risks approach, neither the identity of the person responsible for the crime nor the specific means by which the crime was perpetrated matters for the purposes of cover. Provided that the policyholder has suffered direct financial loss or loss for which the policyholder is legally liable, there is a presumption in favour of cover. >> WHAT APPROACH DOES CRIMEstar TAKE TO CRIMES INVOLVING FRAUD? We understand that there are lots of different ways in which fraud can be committed. Rather than trying to define specific categories of fraud and setting out the basis on which they are covered we have created a single broadly based dishonesty test designed to minimise the scope for coverage disputes. >> I UNDERSTAND WHAT S DIFFERENT WITH RESPECT TO CRIMES INVOLVING DISHONESTY, BUT WHAT ABOUT CRIMINAL DAMAGE? Good question: The key difference between CRIMEstar and conventional crime policies with respect to criminal damage relates to the breadth of the definition of property. It matters not whether the damage is to physical property, money or securities, or information or data stored on computer systems as long as the property belongs to the insured. 6 commercial crime from a different angle
>> WHAT ABOUT CLAIMS HANDLING? This is the key to any good commercial crime cover (and arguably any insurance cover). The policy lays out a simple and non-prescriptive proof of loss process. It also provides automatic and additional costs protection for the insured in connection with assimilation of evidence of information necessary to submit a proof of loss which can be triggered on notification of a potential loss. >> WHAT HAPPENS IF I BUY OR SELL COMPANIES DURING THE POLICY PERIOD? We recognise that this type of corporate activity goes on all the time and have sought to minimise its impact on CRIMEstar coverage. Accordingly, there is automatic cover of up to one year for crimes discovered in a subsidiary post sale provided that they have been committed prior to sale. There is also automatic coverage for all entities acquired by the policyholder during the policy period up to 100% of the gross annual turnover of the policyholder. >> ARE THERE ANY OTHER BENEFITS OF BUYING A CRIMEstar POLICY? In developing the product we have paid attention not simply to the breadth of cover and the proof of claim process but also to the purchasing process itself. Accordingly, it is possible to purchase CRIMEstar by completing a simple one page proposal form. Equally, it is possible to secure a commitment for up to three years continuity of cover and to purchase cover with no retroactive date at inception. >> WHO IS CRIMEstar TARGETED AT? CRIMEstar is suitable for any company. >> WHICH INSURERS ARE BEHIND CRIMEstar? CRIMEstar has been developed in association with QBE, Axis and Allianz who are the principal lead markets. It is, however, widely supported by many large and well-known insurers in the London market. Current capacity is running at GBP 100m. >> ARE THERE ANY OTHER HIGHLIGHTS OF CRIMEstar? Yes, there are several important benefits available to companies which, for reasons of length, we do not list and address here. Many are contained in the key features. Alternatively we would be more than happy to answer any further questions if you email us at CRIMEstar@willis.com >> Will I pay a higher premium if I buy CRIMEstar? Our insurer partners have not indicated that they will seek to charge higher premiums for CRIMEstar than for their own proprietary products. >> IF WILLIS IS NOT MY BROKER CAN I STILL OBTAIN A CRIMEstar POLICY? No, CRIMEstar is only available to Willis clients. >> HOW DO I APPLY FOR A CRIMEstar POLICY AND HOW LONG WILL IT TAKE TO GET A QUOTE? You can request a quote from your Willis Client Advocate or send an email to CRIMEstar@willis.com alternatively contact Leslie Wright, Mark Wakefield, Andrew Minns or Julian Martin (contact details on the reverse of the brochure). We aim to provide a quote within 5 working days (in some cases a letter of authority may be needed which may affect the 5 day turnaround). commercial crime from a different angle 7
Leslie Wright Tel: +44 (0)20 3124 6615 Email: leslie.wright@willis.com Mark Wakefield Tel: +44 (0)20 3124 6627 Email: mark.wakefield@willis.com Andrew Minns Tel: +44 (0)1473 223 770 Email: andrew.minns@willis.com Julian Martin Tel: +44 (0)20 3124 6551 Email: martinjp@willis.com Willis Limited The Willis Building 51 Lime Street London, EC3M 7DQ United Kingdom Tel: +44 (0)20 3124 6000 www.willisfinexglobal.com Willis Limited is authorised and regulated by the Financial Conduct Authority. Registered address: 51 Lime Street, London, EC3M 7DQ. Registered number 181116. England and Wales. 11846/05/13