Protecting Yourself Against Employee Dishonesty

Protecting Yourself Against Employee Dishonesty

Are you aware of the benefits of employee dishonesty insurance? Many tanning salon owners aren't, although this coverage can be as important as fire insurance when it comes to protecting your business.

And unlike a loss due to fire, losses due to employee dishonesty may accumulate over time and can reach alarming levels before being discovered. If you have one or more employees, please read on to find out how this important--and affordable--coverage can help safeguard your business.

Employee theft ranks as one of the most under-reported crimes in the United States today. Estimates vary, but it's safe to say that many millions of dollars are lost due to employee dishonesty every year. Many business owners victimized by employee dishonesty suffer severe financial damage and, in the worst cases, end up in bankruptcy. While the majority of dishonest acts are one-time or occasional thefts, most large losses are caused by long-term, ongoing schemes by one or more trusted employees.

Unlike losses due to burglary and robbery, losses due to employee dishonesty are excluded under virtually all commercial property policies. In other words, without specific coverage, you are at risk. Tanning salon owners who choose not to be suspicious of their employees often overlook employee dishonesty insurance. This is a regrettable situation, as your most-trusted employees are in the best position to use their knowledge of your business operations to steal or embezzle from you. One case in particular occurred when a salon owner treated a young employee like family--only to find out she had been siphoning money out of his business for years.

What can you do to protect yourself from employee dishonesty? In addition to securing adequate insurance protection, the best-available defense includes implementing strict operating controls in combination with careful employee supervision. Some of these loss-prevention measures are listed ahead, but first let's take a brief look at some of the commercial crime exposures facing tanning salon owners--and the coverages available to protect yourself.

Crime coverages can protect you against losses from robbery, burglary, theft, embezzlement and other risks and can be tailored to fit the size and scope of your business operation. In most cases, your business property and liability package policy can be endorsed to provide coverage against employee dishonesty, as well as the loss of money and securities from your premises, and the loss of other covered business property such as computers.

One important point to remember about employee dishonesty claims is that dishonest acts must be committed with manifest intent--a loss resulting from an unethical act, such as lying, must be due to the employee seeking personal gain. Without manifest intent such claims would be disallowed.

Inventory shortages claims also are excluded from employee dishonesty policies because losses can occur from a variety of reasons besides theft, such as accounting errors. Consider also that money and security claims and business personal claims are not the only losses that can be covered under employee dishonesty. Riders are available--to protect you against check forgery, credit-card misuse and computer fraud--to supplement your existing protection at an extra cost.

While no employer completely can eliminate the risk of employee dishonesty, there are several steps you can take to help minimize the risks. For example, checks should be stamped "For Deposit Only" immediately upon receipt, and invoices always should be stamped paid to circumvent the chances of paying the same invoice twice.

If one of your employees maintains your books, be sure that someone reconciles bank accounts other than the person who handles deposits and withdrawals. You might consider instituting an internal audit system for all financial records and have an independent accountant perform a full audit annually.

Implementing security controls and procedures, such as installing video surveillance cameras in your manager's office and other key locations, also can deter the risk of theft.

Implementing a loss-prevention program can reduce your risk of serious financial damage; however, for true peace of mind your best bet is to purchase adequate dishonesty insurance coverage. Consult with your insurance agent or broker for complete details.

Understanding & Preventing Employee Dishonesty

The forces that give rise to employee dishonesty are as complex and varied as the individuals who perpetrate such acts. It's helpful to understand why employees engage in dishonest behavior in order to help recognize and prevent these situations from occurring.

Although a complete analysis of the subject is beyond the scope of this text, there are three key theft motivators that you--as an employer--should recognize:

• Opportunity. Even the most-trusted employee may be tempted to steal if an opportunity arises in which he or she feels safe from discovery. Eliminating these opportunities through proper loss-prevention controls can help eliminate any such temptations.
• Economic or Emotional Pressures Personal hardships caused by chemical dependency, gambling debts or medical bills may create a situation where an otherwise honest employee may become desperate enough to steal. Maintaining a good rapport with your employees can provide clues about any problems they may be experiencing.
• Employee Attitude An employee who feels that he or she has been passed over for a raise or promotion may turn to theft in order to take back what they consider theirs. A combination of sound loss-control procedures and good employee communication practices can help reduce the chances of such situations occurring.

Regardless of the size of your tanning salon, securing adequate coverage is essential for protecting your business and your peace of mind. Universal Insurance Facilities, Ltd. offers a complete package of coverages specifically designed to meet the unique needs of the tanning industry.

Universal's program is underwritten by the American International Group (AIG), one of the world's largest commercial insurance and financial services organizations. Rated A++ (Superior) by A.M. Best Company. For more information, or to get a quick, no-obligation quote contact Universal Insurance Facilities, Ltd. P.O. Box 40079 Phoenix, AZ 85067-0079 (800) 844-2101, fax: (480) 970-6240, email: uif@vpico.com, Web site: www.vpico.com/universal.