DID YOU KNOW… According to the Association of Certified Fraud Examiners (ACFE):  The estimated cost of fraud to the world economy in 2012 was US$3.5trillion (by comparison the estimated combined losses for all classes of non-life insurance over the same period is approximately US$1.4trillion)  More than one-fifth of the frauds involve losses of at least US$1m  49% of companies do not recover any losses that they suffer due to fraud  Most frauds reported to ACFE lasted a median of 18 months before being detected

DID YOU KNOW… (CONT) According to the Association of Certified Fraud Examiners (ACFE):  77% of all frauds are committed by individuals working in one of six departments: ‒ Accounting ‒ Executive/ upper management ‒ Operations ‒ Customer service ‒ Sales ‒ Purchasing  The longer a perpetrator has worked for an organisation, the higher fraud losses tend to be

How to work out what’s covered? How to prove loss? THE TWO PROBLEMS WITH CONVENTIONAL CRIME POLICIES

CONVENTIONAL RECIPE FOR FRAUD COVER: Take:  various categories of fraud e.g. ‒ Skimming- Embezzlement ‒ Theft- Corruption ‒ Payroll fraud- Cheque/ Bank transfer tampering Add:  various legal ingredients ‒ ‘permanent deprivation of property’ ‒ ‘intentional deception’ ‒ ‘personal gain’ Season for:  insurer appetite Add:  insurer house style for drafting, definitions etc. Result = complexity

CRIME STAR APPROACH TO FRAUD A simpler recipe: A single dishonesty based test “Fraud means theft and/or any other dishonest act or omission…” No link to ‘Property’ necessary Result = greater clarity

SHOULD IT MATTER WHO IS RESPONSIBLE FOR THE FRAUD? Conventional Approach Fidelity Cover Commercial Crime Cover Definition of ‘employees’ CRIME STAR Approach All employees and/or others

CONVENTIONAL RECIPE FOR CRIMINAL DAMAGE TO PROPERTY: Take:  One of the lawyer’s favourite questions; ‘What is “Property’? Season for:  insurer appetite Add:  insurer house style for drafting, definitions etc. Result = complexity

CRIME STAR APPROACH TO DAMAGE TO PROPERTY A simpler recipe: “any tangible or intangible property owned by the insured or for which the insured is legally liable including money, securities, instruments, documents, data or other information stored on computer systems”. Result = greater clarity

HOW TO PROVE LOSS - THE CRIME STAR APPROACH Crimes discovered basis of cover Fully retroactive Automatic acquisition protection

HOW TO PROVE LOSS - THE CRIME STAR APPROACH (CONT) Clear and generous notification regime ‘Proof of Loss’ Additional limit to assist in information gathering process No blanket exclusion in respect of post-discovery loss

WHAT ABOUT THE OTHER CRIME STAR EXCLUSIONS? Controlling Shareholder Fire, Explosion, Terrorism, Nuclear Hazards Trade Secrets, Copyright etc. Trading Computer Virus ‘Indirect Financial Loss’

SOME OTHER IMPORTANT STUFF… Ease of application process Continuity of cover Worldwide cover It really is only 6 pages long

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