Crime Insurance provides coverage for events not covered by most property or liability insurance policies.

Different Crime Insurance Clauses

There are several ways that businesses could be exposed to crime, both from within the organisation as a result of employee infidelity and from third parties. Crime Insurance provides coverage for events not covered by most property or liability insurance policies:

  • Clause 1 – Employee Infidelity: This clause protects the company from dishonest and fraudulent acts of the employees. This is the major source of all crimes committed against companies worldwide. The clause is very broad and covers almost any crime committed by an employee, whether alone or in collusion with others (both other employees and third parties such as crime gangs) which causes a loss to the company.
  •  Clauses 2 & 3 – Premises and Transit: This is the physical and stock cover for the company and will cover burglary and armed robbery by third parties. It can cover everything from machinery to stock to cash on-premises and has the benefit of covering valuables when in transit as well. Whilst not as effective as a cargo policy, this can provide contingent cover where a third party has a loss, and their insurance does not act.
  • Clauses 4-6 – Forgery and Counterfeiting: These clauses cover the forgery of documents holding a real value and are relied upon by the client for processing cash settlements or disbursement of cash.
  • Clause 7 – Damage due to any of the above clauses: If there is damage to any property as a result of a theft or robbery, then this can be added to the claim. A typical loss here is the destruction of a safe.
  • Additional extension on Computer Crime and Telephonic Crime: This covers the loss to the company by use of a computer or telephone and can have a very broad scope. It is in effect the cover for robbery or theft using a computer rather than a weapon or forced entry. These types of loss are rising due to the less severe penalties for being caught and the fact that they can be carried out remotely, thus lessening the chance of being caught. 

Nature of the Product to be Stolen

As with most businesses, there is a specific risk from the behaviour of employees and some of the causes are listed below. With Agribusiness there is the added threat that they deal in the most stolen goods worldwide accepting cash. There is a simple way of calculating the desirability of products and food that tends to meet all of the definitions to a high degree.

When looking at the product we must consider three themes and if the answer is yes to all three then it is an at-risk product:

  • Desirability – Do people want/need the product?
  • Portability – Is it easy to steal, especially in large volumes?
  • Saleability – Is it easy to sell, would it attract attention to the seller doing s

For example, in Poultry business we can see the following:

  • Desirability – Chicken is the most widely bought meat worldwide and so we can see that there is a demand for chicken products. 
  • Portability – Due to the nature and volume of sales it is surprisingly easy to steal poultry. A faked invoice or paying off the warehousemen or guards on the gates of the processing plant will allow a thief to drive right up to the plant and collect their haul.  
  • Saleability – People want poultry products, and whilst cheap poultry will raise a few eyebrows, it is unlikely that people will turn down the opportunity for cheap food. Selling on a market stall at a food market or arranging with a retailer to buy the products will make this easier, and the police are less likely to question the sale of chicken in this environment. 

So we can see that the products are at real risk, employees working hand in hand with outside groups can cause large losses very quickly here. In the agriculture sector, we have seen numerous large losses worldwide, and usually in basic food such as milk, meat, bread and cereals rather than finished products.

Typical Crime Losses for Food & Agriculture

There are multiple different potential crime losses for Food & Agriculture companies.

  • Addiction Issues  – These individuals start not wanting to be frauds but rapidly turn into a problem for the employee. Typically, they will have a drug, alcohol or gambling issue and will ‘borrow’ money to rectify an immediate situation, always to pay the money back. Usually, the problem spirals out of control and they start taking more and more to fix the problem until they finally realise that they cannot do it and flee. Whilst not the largest losses they can reach some big figures and 1 Mio. EUR is not uncommon, although figures in the hundreds of thousands are more likely.
  • Blackmail   – A member of staff is found in a compromising situation and criminals find out. They use this to force the employee to carry out some tasks to either enable them to access the employer (electronically or physically) or to simply force them to steal themselves. It can be anyone in a company, and losses can be from around 50,000 EUR for a straightforward taking of cash from the safe to millions of Euros from granting access to the computer systems. We see simple ideas such as leaving a door open to targeted blackmail on employees who hold passcodes for payments etc. in this example.
  • Invoice Fraud  – A member of staff who has control of tendering or contracts will conspire with a supplier to inflate invoices. Usually, they will split the difference between the ‘real’ price and the stated price. This will mean that either poor quality services are supplied or overcharged services with reasonable quality are given. This can very quickly add up, and if the staff member is allowed a level of autonomy in this area it can be hard to detect as they will often receive fake quotes to cover the fraud.
  • Delivery Fraud – This often works for hand in hand with either blackmail or general corruption. A gang will find a suitable member of staff who has access to warehouses or other storage facilities and find a way to get them to aid them in their plans. This can be through a simple cut of the profits (Improper Financial Gain) or blackmail. Either way, the staff member will grant them access to the facility through either forged paperwork or being there themselves to open the door. Whole lorry loads of goods can be taken, and losses can mount up quickly. Only when the goods are not paid for, the loss is discovered, which can be some time down the line. Achieving security against this can be difficult as the papers to release the goods will be official and unlikely to be queried at the gate.
  • Bookkeeping Fraud – A simple fraud that involves transfers of money, payments and general accounts of the client. No real sophistication to it – just plain theft. 
  • Social Engineering / Fake Presidents – These are two differing frauds but have the same method at their heart. Both rely on a level of trust either built up over time or gained by electronic means. 

    Social Engineering can take the form of regular phone calls building up a rapport, targeted emails (finding out the hobbies of a member of staff and then sending them links – Spear Phishing), or even working on an out-of-work friendship which then turns into a request for help. All of these come under the Social Engineering banner. Once the trust is established, there will be a request to transfer funds, either for a legitimate-looking reason or for help to the person conducting the fraud. Once the money is transferred, the contact usually ceases immediately.
     Fake Presidents is where a call is made seemingly from the CEO or CFO, usually on a Friday afternoon, requesting an urgent fund transfer. Usually, the reason is that if the transfer does not go ahead, a deal will fall through harming the company. The call will seem to come from the senior staff members but will be the criminals. They can hack phone systems to present the phone number of the person they are impersonating, use email addresses which are one letter different to the person etc. A less sophisticated version is hijacking emails and changing bank details at the last minute, in a deal to the fraudster’s account. 

Conclusion about Crime Insurance in Food & Agriculture

As we can see from the described above cases, “non-tangible damage” (financial) losses, caused by infidelity of employees or third-party criminals, can bring quite a significant gap in the balance sheet of any Food & Agriculture enterprise. On the other hand, such losses are not covered by a standard property damage/business interruption insurance contract. Additional commercial crime insurance policies are recommended. The indemnity limit of 1 million EUR costs starts from 50,000 EUR, as a rule, with the same amount of deductible.

Related Insights

Brian Alexander, GrECo Group Practice Leader Financial Institutions

Brian Alexander

Group Practice Leader Financial Institutions

T +43 5 04 04 342

Shylov Maksym, GrECo Practice Leader Food & Agriculture

Maksym Shylov

Group Practice Leader
Food & Agriculture

T +48 22 39 33 211