Warning To Business Insurance Clients: It’s The Most Fraudulent Time Of The Year

insurance fraud

Photo from Scott Smith

With the holiday season upon us, the time to increase staffing is here. Many small business owners will not want to be caught in a bind due to lack of help, and so they will amp up their hiring practices. If you are an insurance agent, who carries a lot of business clients, you need to take this opportunity to warn these clients about adding too much staff too quickly. Why?

Because as ACFE Vice President and Program Director Bruce Dorris and Eric Feldman, managing director, corporate ethics and compliance programs for Affiliated Monitors, point out, it’s the most fraudulent time of year and a few bad apples can spell catastrophe for any business.

The pair fielded questions in a recent sit-down with Insurance Journal and revealed some rather disturbing statistics. For starters, organizations lose an estimated five percent of total revenues to fraud — this coming from the ACFE’s 2014 Report to the Nations on Occupational Fraud and Abuse — and “Even worse, additional ACFE research indicates that fraud takes an estimated 20 percent uptick during the holiday season.”

The pair adds that it’s “a serious problem, and without controls in place to prevent and detect fraud, that degree of loss can be devastating” with “high traffic and increased sales” providing ample opportunity for both internal and external activities.

So what can small business clients do to avoid taking the hit? Don’t wait for them to ask you. Share these tips!


One: Don’t get lax on hiring standards.

Many small business owners have a detailed vetting process in place whenever they think about hiring a regular staffer. Adding temp employees around the holidays tends to get thought of as an afterthought. There’s this attitude that “we just need a warm body to keep us from falling behind.” Unfortunately, as the statistics show, that warm body can be what causes a business to fall behind rather than increased demand. Advise your clients to stick with their established hiring procedures before bringing in additional help for the holidays, and if they don’t have a standard hiring procedure, advise them to get one. It may mean having to work harder with fewer people, but it can definitely be the difference between making and losing money.


Two: If you have to hire quickly, ask more of your regular staff.

If your small business clients have a reliable staff in place, then a better course of action for the holidays might be to put a premium on their time and shift more major responsibilities to the established team. For “heavy lifting” work that just requires that aforementioned warm body, bring in temp help but make sure they don’t have position or responsibilities that might enable them to take advantage and commit fraud on the business. Ultimately, each business owner will have to know their business well enough to know how they can implement this, but it’s definitely worth consideration.


Three: Make sure you have some insurance against fraud.

Before the busy shopping season, encourage small business clients to come in and sit down to reevaluate insurance needs. After all, they can’t be everywhere at once, and if they do by chance take a loss due to employee fraud, there could be some fallback lurking within their existing policy.

The full Q&A is worth a read, and you can find it here.


In Summary

The holidays are a busy time but that’s not a good reason to get so rushed that poor decisions become the norm. If you have small business clients who hire additional employees during the holidays, make sure you meet with them ahead of time and go over the risks and their options.

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