Fidelity/Crime Loss History
Fidelity/crime loss history records past employee dishonesty, theft, fraud and cash-handling shortfall events, giving underwriters direct evidence of internal control effectiveness and moral hazard within an organisation.
- Category
- History
- Data type
- List
- Risk drivers
- Moral hazard, Frequency, Severity
- Underwriting impact
- Premium, Deductible, Sublimit, Exclusion
Typical proposal-form questions
- Please list all discovered instances of employee dishonesty, theft, fraud or cash/inventory shortfall of the last 5 years, stating date, department, discovery method and amount.
- Was the responsible employee's role subject to segregation of duties, dual control or independent reconciliation at the time of the event?
- Have any losses led to disciplinary action, prosecution or a change in internal controls?
Evidence
- Internal audit or investigation report on the discovered event
- Fidelity/crime loss run report from the current or prior insurer
- Documentation of control changes implemented after the event
Why it matters for underwriting
Fidelity and crime losses are unique among loss history categories in that they arise from deliberate wrongdoing by a trusted insider rather than an accident, making the discovered event itself powerful evidence of a specific control gap, such as absent segregation of duties, weak dual control over cash or inventory, or insufficient independent reconciliation. Underwriters treat any disclosed event as a direct indicator of moral hazard within the organisation and examine not only the amount lost but how the scheme was structured, how long it ran before discovery, and by what means it was ultimately detected.
Capturing the attribute and evidence
Proposal forms ask applicants to list discovered dishonesty, theft, fraud and cash or inventory shortfall events of the last five years, including the department involved, the discovery method and the amount. Underwriters verify this against the internal audit or investigation report prepared once the event was uncovered, a formal fidelity/crime loss run from the current or prior insurer, and documentation showing what control changes, if any, were implemented afterwards to close the specific gap that was exploited.
Effect on coverage, premium and conditions
A clean history combined with documented segregation of duties and independent reconciliation supports standard premium rates and full limits. A disclosed event, particularly one that went undetected for an extended period or exploited a control gap that remains unaddressed, typically results in premium loading, higher deductibles, department- or role-specific sublimits or exclusions, or mandatory control-improvement warranties as a condition of cover.
Mitigation measures
Insurers typically require documented implementation of segregation of duties and dual authorisation for cash and payment processes, independent and unannounced reconciliation reviews, and periodic internal audit coverage of the specific function or role where the discovered event originated.
Standards and codes
- ISO 31000:2018 – Risk management, Guidelines