Jan 4, 2009 Insurance doesn't cover 'inside jobs'
Thefts by employees not covered unless retailers get Fidelity Guarantee cover
By Shuli Sudderuddin Retailers and businesses often look to insurance to cover their losses from theft.

But under some insurance schemes, they may not be able to make a claim if the theft was an 'inside' job, those in the industry say.

Theft made headlines recently when $7.9 million worth of watches and cash went missing from Cortina Watch's Raffles City outlet.

Staff discovered 386 timepieces and cash missing on Dec 26.
Some signs that the theft was an inside job have emerged.
Tenants and security guards in Raffles City told reporters that no alarms went off and there were no signs of a break-in at the store.

Police are now looking for an ex-employee of the store to help in investigations.
He is said to have gone missing after the pieces disappeared.
In what appeared to be a related development, his services were terminated by Cortina Watch.

Insurance is a sensitive subject judging by how many of the luxury good retailers approached declined to comment, saying security and insurance were 'confidential'.

Retailers The Sunday Times spoke to said that a shop's stock is generally insured by its total value.

A spokesman for NTUC Income said that general insurance comes under several categories.

He said shops normally buy insurance for fire, theft or 'all risks', which covers fire, theft and accidental damage but excludes deliberate acts, wear and tear - as well as theft by employees.

Ms Florence Chew from the business insurance division of Tenet Insurance said specific insurance can be bought for theft.

'Burglary insurance' provides protection for the loss of property, excluding money, following a break-in into the premises with some form of forcible entry.

The sums insured can reach the full value of the items at risk, but an industry norm is to insure only up to a certain percentage, she said.

The intent of burglary insurance is to cover theft only by a non-related party - which excludes theft by employees.

Retailers dealing in jewellery or high-end watches also have the option of a Jewellers Block Insurance.

Ms Chew said that this policy addresses the loss of stocks in trade, including customers' goods which are being held by the shop for repair or servicing.
It also insures property such as fixtures, fittings and money.

However, it too does not cover fraud or dishonesty of employees.

In order to be able to claim insurance for an inside job, retailers must take out what is known as a Fidelity Guarantee (FG) cover.

Mr Nehemiah Neo, managing director of Insight, a leading loss adjuster that investigates circumstances leading to the loss, said the FG cover is a separate class of insurance.
It is based on the insurance company guaranteeing the fidelity or honesty of one's staff, and takes into account the risks incurred with people who have access to goods or cash and the system of checks and security that is in place.

'In this case, you have to name the staff that you want to cover or the category of people you want to cover, such as accounting personnel, warehouse staff, salesmen and even the company directors,' said Mr Neo.

Mr Alfred Png, owner of Png Watch Dealer at Beach Road which deals in second hand watches, pays $7 per $1,000 value of his stock.
'You can imagine how much that can add up to when the stock value is above a million dollars,' he said.

Luxury artwork dealer the Opera Gallery in Ngee Ann City said it insures all its artwork against theft.

Said a spokesman: 'We take up a very high premium for each and every piece with a fine art insurer in the United Kingdom and the insurance requirement is that we set up a strong and sound security system.
The system includes 24 hour hidden cameras and security alarms.

A spokesman for the General Insurance Association said that after a loss, the insured must inform the insurer within a reasonable time from the discovery of the loss.
After an independent loss adjuster investigates the circumstances leading to the loss, proceeds of the claim will be paid to the insured if it is found that the loss was covered.

While insurance has been a standard precaution all along, it seems that retailers are growing more cautious.

Mr Neo, for one, has seen more businesses taking out FG covers against white collar crime in recent years.

He said: 'People didn't use to take it out because they didn't think it would happen to them.
I always tell them, you don't know what people will do when they are desperate or tempted.'

by shulis@sph.com.sg