The Dowd Agencies

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According to a 2008 study conducted by the Association of Certified Fraud, U.S. businesses lose about 7% of their annual revenues to fraud.  This equates to a staggering $994 billion loss each year nationwide to employee fraud.  Even worse, occupational fraud schemes are extremely costly to a company’s bottom line, with the median loss in the 2008 study coming in at $175,000!

The three most common categories of employee scams are: fraudulent statements; asset misappropriation; and bribery or corruption.  Two out of five businesses suffer more than five instances of fraud, and one in four loses at least $1 million as a result of fraud.  For these reasons, crime insurance is a wise purchase, extending coverage to you and your business for fraud-related financial losses.

In addition to covering employee fraud, most crime insurance policies also cover third-party scams including forgery, counterfeit currency, and theft of company property.  Many policies also cover money losses due to computer fraud by hackers who seek company funds, customer credit card numbers or other financial data.

Technology Makes Fraudulent Schemes Much Easier to Accomplish

In fact, as more and more business is done over the Internet, computer coverage and protection against unauthorized funds transfers or computer access are on the rise.  For example, with a simple scanner, it is easy to forge a check, and many fraudulent Web sites attempt to collect personal data from unsuspecting victims.

Not all fraud-related crimes involve money.  Some involve company goods that have no apparent value. Keep in mind, there are markets for many unusual items.  One insurance company tells of a meat packing plant where an employee was stealing animal fat, and selling it for personal gain.

Making Sure Your Business is Covered

Although many employees carry out such crimes because they are disgruntled, the most common motivations for employee fraud are greed, vindication against the employer, and financial need.  Regardless of motive, you need to be aware of the possibilities, and adequately covered.

When employees get caught for such crimes, they do jail time, but companies never fully recover the total amount lost.  That’s where crime insurance comes in.  With proper coverage, you can recoup your financial losses.

In addition to crime insurance, it is also recommended to maintain a strong system of checks and balances to ensure unethical employee behavior doesn’t pay off.  Such controls can affect your company’s insurability and premiums as insurers examine the extent of internal controls, as well as a company’s history of fraud losses when determining whether the company is a good risk.  With a combination of crime insurance as well as internal control procedures, you will protect your company as well as show dishonest employees that crime doesn’t pay.

Please keep in mind that several carriers have added a coverage to their crime package called ‘Funds Transfer Fraud’.  The coverage is inexpensive, but if you are doing a lot of banking via the internet, it will cover an exposure to your business that could be sizeable.  Unfortunately, hackers are here to stay and we must consider this exposure in developing your business risk management program.

Insurance buyers are both better educated about the insurance business and far more sophisticated in their insurance demands than ever before. Today, the buyer of insurance-whether an individual providing for a family’s needs or a risk manager of a corporation –knows that an integrated program of insurance protection consisting of property, casualty and liability, life and health insurance is needed. Liability, in particular, is an area that if not properly addressed can have an enormous impact on your company’s balance sheet.

Third Party Liabilities

There are many types of third-party liabilities that businesses should be covered against. In addition,  to property loss and personal injury, businesses should be protected against claims such as damage to the property of others, allegations of false advertising, cyber liability and legal liability stemming from employment practices. In the event that a claim is filed against you, liability insurance will provide you with a legal defense. Should the judgment go against you, your liability insurance will pick up the tab for covered damages up to the policy’s limits. Keep in mind that liability insurance can also serve as the collateral needed to post a bond appeal. Without the ability to post a bond, however, your company will not be able to start the appeal process.

What’s Your Risk Level?

Evaluating your level of risk is a complex issue. Although young companies generally have a low level of risk, you should buy coverage with an eye toward the future. This is especially important if you are developing products with the potential to impact a large number of people. The greater the potential impact, the greater the possibility your company will find itself as the defendant in a class action lawsuit. Other factors you need to consider include the size of your company’s operations, geographic locations, industry trends, organizational structure, amount of capital at stake, you and your staff’s degree of experience and expertise in the field, and any general industry hazards.

Determining the amount of liability coverage you need should be considered a work in progress. A review of your risk analysis should be done periodically, perhaps at each renewal. You should also review your insurance needs whenever your business changes in size, diversifies into new markets, or relocates.

Risk Transfer Program

Preventing a claim from being brought against you or deflected to another party provides a great amount of protection to your company’s assets. The insurance industry calls this process risk transfer. The basic foundation to this concept is: a contract with your vendor or contractor requiring an additional insured clause (you, added to their policy), a hold harmless or indemnification clause, an insurance required section and a properly executed insurance certificate, evidencing the requested coverage. At the very least these requirements should be inserted in your purchase order agreements as part of the terms and conditions found on the reverse side.

By adopting the risk transfer program you have enabled an extra measure of protection to guard against claims and lawsuits. The other party responsible for the incident, leading to a claim, provides their insurance coverage first. Should their limits be exhausted then you can fall back on your program of insurance thereby increasing limits available to your business.

Why You Need the Insurance Certificate

Do not underestimate the importance of the insurance certificate. When properly completed it provides valuable information about the other party’s insurance limits, dates of coverage, name of the insurance carrier, policy form, types of policies, policy numbers, cancellation clauses and any special additions or changes in coverage as necessitated by the contract. It should be signed by the issuing insurance carrier or insurance agent evidencing that the form has been reviewed for proper completion. If any information is missing it should be promptly addressed and returned to the contractor, supplier or vendor for reissuance. Your accounting department or accounting manager should not pay any invoices relating to the contract until such evidence of coverage has been received by you.

Remember that any of the coverages on the certificate represents what is in force on the day the form is issued. You should have in place a procedure for an annual follow up for reissuing the certificate. Coverages may be different should your vendor or contractor change insurance carriers at their renewal date.

Be sure to require your insurance representative to annually review your program of insurance. Today’s business climate often necessitates change to adjust to the economy. With good communication your agent should adopt your program for proper coverage and premium.

Fear is an important motivator when it comes to buying insurance. We worry about what will happen to assets like cars or homes if they are involved in a disaster, so we buy insurance to help us maintain their financial integrity if something should happen.

But in spite of the fact that insurance is designed for this purpose, sometimes it can’t give us the outcome we expect. That’s not because of something inherently wrong with the policy, but rather it is the result of human failure. When you bought your

policy, you failed to take into consideration the level of coverage you really needed, and what you have isn’t sufficient to restore your assets to pre-disaster condition.

Initially those low premiums will seem like a savings; but if the cost of an accident ends up being more than your policy coverage limits, the rest of the expense will be out-of-pocket. In addition, the other parties involved could sue you, and if you don’t have any coverage, you could end up losing a large part of your assets.

 There could be a legitimate instance in which you don’t pay on time. However, when you don’t pay, your insurance company isn’t required to cover you. To avoid a disruption in coverage, set up automatic payments through your bank or insurer.

There are limitations to the coverage a homeowner’s or auto policy will provide for high-ticket items. You should never assume that all of your possessions are covered. What you can do is add extra coverage to your policy with an endorsement, which gives you higher limits on these types of items.

 These policies got their name because they protect you from a financial downpour. They can be purchased separately or you can obtain one from the same company that insures your car or home. Buying from the insurer you already have usually entitles you to a premium discount on the liability coverage. Umbrella policies are usually sold in increments of a million dollars. Generally you would pay between $100 to $300 a year for the first million dollars worth of coverage and another $50 to $100 for each additional million. Keep in mind that when determining your premium, your insurer may take into consideration such factors as the number of traffic tickets you’ve received over the past few years, and your credit report.

 If you’ve added on to your home, or purchased an expensive sound system, you need to contact your agent to see if the policy you have still meets your needs. Your agent can also find ways to help you save money on premiums that won’t affect the quality of your coverage such as enrolling in a driver safety class, installing a home security system, increasing your deductible, , or taking advantage of multi-policy or good student discounts.

Holyoke/Amherst, MA – The Dowd Agencies, a locally owned independent insurance agency announces two new additions to its growing staff.  Diane LaFleche and Jim Lawton recently joined the agency and will be working out of the Cray-Dowd Amherst office. 

Diane will serve as Cray-Dowd’s Commercial Lines Account Manager/Marketer for the Amherst location. In this role Diane will work with new and existing business insurance clients. She will also assist Dowd’s producers on quoting accounts. Diane is a Certified Insurance Service Representative (CISR) and brings over 23 years of insurance experience to Dowd. She maintains insurance licenses in Massachusetts and Connecticut. She is also a Notary Public. Diane is a native of Amherst and currently resides in town.

Jim Lawton has joined The Dowd Agencies as an account executive, with an emphasis on commercial and personal lines sale of property and casualty insurance. He maintains an insurance license in the state of Massachusetts. Most recently, Jim was a property and casualty producer for a local insurance agency here in the Pioneer Valley. A graduate of Brandeis University, Jim served as President of the Business Network International. He is also a member of the Northampton Chamber of Commerce. A native of Western Massachusetts, Jim resides in Conway with his family.

“The addition of Diane and Jim will further strengthen our team of insurance professionals,” says John E. Dowd, Jr., Partner of the Dowd Agencies. “We are delighted to welcome them as part of our team and are confident that their enthusiasm and expertise in the insurance industry will be a great asset to our customers.”

Have you ever thought about what happens to the sensitive data stored on your company computers if they are lost or stolen?  What about unhappy employees or cleaning services using private customer information in unethical ways?  Click here to read about John E. Dowd, Jr.’s article for Business West on Electronic Data Liability Coverage: How to keep your business protected.