Economic downturn fuelling corporate fraud and corruption risks

Firms' fraud insurance policies may be out of date and not able to respond to advanced in criminal fraud techniques, warns broker

LONDON - UK firms are exposed to heightened fraud and corruption risks this year as a result of the global recession, warns insurance broker and risk adviser Marsh and sister company risk consultancy Kroll. Although it is well known that fraud risk increases during a downturn, less known is the fact that many insurance policies could fail to fully respond to consequences of the emerging innovations in fraud techniques.

Many fraud policies have not yet been adapted to reflect legislative changes enacted by The Fraud Act 2006, which clarified and updated offences of fraud under UK law.

"Two years since its implementation, many fraud insurance policies have still not been adapted to reflect both the changing legislation and new and emerging criminal techniques," warns Dean White, a managing director in the financial and professional practice at Marsh.
"Clients need to work with their insurers and risk advisers to identify and assess the efficacy of their cover, rather than buy on price alone. Fraud insurance is not 'all-risks' protection, and individual policies vary significantly in terms of their breadth of coverage and appropriateness for individual business sectors."

As a result of the rise in claims relating to financial crime, Marsh has launched a new claims service to help firms manage claims relating to fraud. The team provides guidance to insureds through the claims process, including policy interpretation advice from specialist claims advocates, calculation of the claim by forensic accountants in accordance with the policy terms, presentation of the claim to insurers and obtaining claim payments or negotiating settlements where required. The service is a collaboration between the Claims Advocacy Unit of Marsh's Financial and Professional Practice and the Forensic Accounting and Claims Services (FACS) team in the UK.