These steps are not rocket-science, they are common sense and the cost of implementation is much less expensive than the cost of one event of fraud. If you are an insurance underwriter or adjuster, encourage your insureds to implement these ideas. If you are an owner/key employee in a business, get started on these steps today.
The average cost of one internal/external fraud committed against a business and/or the cost of an insurance fraud perpetrated against an insurance company and an insured business is estimated at $154,000. Note that 40% of insurance/business fraud tips are received from employees of the organization, over 20% of fraud is discovered through internal audits and over 12% of frauds are accidentally discovered. Enhance these opportunities with the following:
- Conduct thorough pre-employment background checks, reference checks and verify the accuracy of applicant information to thoroughly vet new-hires. Then annually, update criminal record check and driving record check information on all employees. Hire good employees, encourage whistleblowing without retaliation, and the return on the investment will pay huge dividends.
- Engage management and employees to write, periodically update and embrace a code of ethical conduct tailored to the business. This instills ownership in everyone and describes how the business is to be run.
- Divide bookkeeping and check signing authority.
- Deliver bank statements unopened to top management.
- Implement simple and non-threatening reporting procedures and install a hotline to uncover wrongdoing. Punish the wrongdoers, and reward the whistleblowers.
Demonstrate a zero-tolerance approach to fraud, whether premium fraud, worker’s compensation fraud, internal theft, etc., by sending a loud and clear messages to employees and to other businesses. Prosecute and/or pursue civil remedies against the wrongdoers.
Research North, Inc. (RNI), is a professional private detective service providing support to the business community, the insurance industry and individuals in Michigan and Wisconsin since 1981. The company also offers pre-employment background checks to small and medium sized businesses through a subsidiary called Backgroundcheckswork.com that is fully staffed by professional investigators who are retired from law enforcement.
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