Happy readers. Welcome to Liga Asuransi dedicated to risk management and insurance insights in Indonesia. On this occasion, we would like to share about one of the insurance products that is increasingly needed especially for you business actors.
In an increasingly complex and competitive business world, the risk of internal fraud can be a serious threat to the sustainability of a company. In this case, there are many cases of embezzlement or financial manipulation carried out by insiders that are only detected after major losses have occurred. This shows that an internal control system alone is not necessarily enough. dishonesty is present as an important solution to protect the company from losses due to employee actions such as embezzlement, fraud, or abuse of authority.
In the country, awareness of the importance of this insurance is increasingly felt, especially in the banking, financial, and other large corporate sectors that are vulnerable to fraud. Therefore, having additional protection through dishonesty insurance, or what is known in insurance terms as fidelity insurance is a strategic step that can provide peace of mind and long-term protection for your business operations.
This article will discuss how we as Insurance Brokers can help you understand the risks comprehensively while providing the best advice so that you can minimize losses due to criminal acts within your company.
What is Fidelity Insurance?
As we have said before, in some cases, companies generally often face cases of embezzlement committed by their financial staff, for example if there are employees who have the authority to manage payments and take advantage of loopholes in the internal control system to transfer funds to personal accounts through fake transaction documents. For several months, this action may not be easily detected because it is done gradually and disguised.
Dishonesty Guarantee Insurance or is a type of insurance protection specifically designed to overcome the risk of financial loss caused by acts of fraud, deception, or embezzlement committed by employees or internal parties of the company. The term “fidelity” itself refers to loyalty and trust, so this insurance focuses on protecting companies from breaches of trust committed by people within the organization.
In contrast to general insurance such as property insurance or fire insurance which protects against external risks such as disasters or theft from outside,fidelity insuranceinsurance handles risks that originate from within the company itself. For example, employees who intentionally steal company money, falsify financial reports, or manipulate data that harms the company financially.
This policy is very important especially for companies with many financial transactions, such as banks, investment companies, distribution companies, etc. By having a guarantee for the risk of fraud from employees, your company can minimize the impact of losses due to dishonest actions from employees and maintain financial stability and business reputation.
Knowing the importance of protection against criminal acts within your company, of course this insurance policy provides a myriad of strategic benefits for your company, especially in managing internal risks that are difficult to predict. Here are some of the main benefits that companies can get by having this guarantee:
- Protection from Financial Loss Due to Employee Fraud
Internal fraud such as embezzlement, document forgery, or financial manipulation can cause huge losses to a company. With fidelity insurance, these losses can be replaced by the insurance company, thereby significantly reducing the company’s financial burden. - Maintaining Stakeholder Reputation and Trust
Losses due to employee fraud that are not handled properly can damage the company’s reputation. The existence of this dishonesty liability insurance protection shows the company’s commitment to good governance and transparency, thereby increasing the trust of customers, investors, and business partners. - Strengthening Internal Control Systems
Companies that apply for this insurance are usually also required to have a good internal control system. This encourages companies to improve monitoring and audit procedures, so that the risk of fraud can be prevented from the start. - Reducing Legal Risk and Liability
If employee fraud causes harm to a third party, the company may face legal action. In this case, it can help cover this risk, so that the company is more legally protected. - Providing Peace of Mind for Management
Management can focus on running the business without worrying too much about the risk of internal fraud because there is insurance protection that reduces the impact of losses.
With these benefits, fraud liability insurance is not just financial protection, but also a strategic tool to strengthen governance and maintain business continuity.
Types of Risks Incurred
This insurance guarantee is specifically designed to protect companies from various forms of fraud and embezzlement committed by employees or other internal parties. Here are the main types of risks that are generally covered by a fidelity insurance policy:
- Embezzlement of Cash or Company Assets
Employees who have access to cash, bank accounts, or valuable company assets can embezzle, either directly or through accounting manipulation. Fidelity insurance provides compensation for such losses. - Document Forgery and Financial Report Manipulation
Some cases of fraud involve forged signatures, fake transaction documents, and even engineered financial reports to hide fraudulent actions. This insurance covers losses resulting from such actions. - Abuse of Authority and Detrimental Financial Decisions
Employees or internal officials who abuse their position to gain personal gain, such as approving fictitious or detrimental transactions to the company, are included in the risk coverage. - Collusion with Third Parties
Fraud involving collaboration between employees and vendors or customers to steal assets, mark-up prices, or fake transactions may also be covered by a fidelity policy. - Cyber Fraud by Internal
In the digital age, employee abuse of system access to move funds, steal customer data, or damage a company’s IT systems can also be covered by some types of modern, expanded fidelity policies.
With this understanding of risk, companies can work with insurance brokers to choose the most appropriate coverage. However, purchasing this coverage directly from an insurance company without professional assistance can cause companies to miss out on many opportunities for optimal protection. This is where the role of an insurance broker is crucial. Brokers not only help choose a policy with the best coverage according to the company’s specific needs, but also facilitate the claims process and premium negotiations. By using a broker, companies get maximum protection benefits as well as cost efficiency that is difficult to obtain if buying directly. This article will discuss more about fidelity insurance and how insurance brokers can be the best partner for your company.
Amidst Indonesia’s dynamic economic growth, companies face serious challenges from within their own organizations, especially in the form ofabuse of trust And employee fraud. These risks are often hidden but can cause major financial losses, operational disruptions, and even damage a company’s reputation. This is wherefidelity insuranceplays an important role as a strategic and effective risk mitigation tool.
Case Study Example
A consumer goods distribution company in Tangerang with more than 300 employees experienced a spike in financial losses due to internal fraud. Over a period of two years, the company recorded recurring cash anomalies, until it was finally revealed that one of its senior logistics staff manipulated shipping data and diverted goods for private sale. Losses were estimated to reach billions of rupiah.
In this case, the company reviewed the monitoring system and traced whether the type of loss could be covered by the existing policy. It turned out that the conventional insurance they had did not cover the risk of employee fraud. On the advice of the broker, the company switched protection to dishonesty insurance and conducted a thorough audit of internal SOPs.
As response strategic, companies can mitigate risks with the following details:
- Restructure transaction authorization and reporting structures.
- Using cloud-based logistics software for data transparency.
- Train HR and finance teams to detect fraud patterns early.
- Add insurance protection for all employees with access to finance and inventory.
A year after implementation, the company recordedreduction in potential fraud losses by up to 80%. Not only that, employees also responded positively because they felt the company system was fairer, more transparent, and safe from unilateral accusations.
As a result, in addition to minimizing financial risk, this step also strengthens the integrity of the company as a whole. Now, management has higher confidence in operational data and feels more prepared to face similar risks in the future. Fidelity insurance is not just protection, but part of a healthier and more structured governance strategy.
Why is the Role of Insurance Brokers Needed in Managing Internal Fraud Risk?
Internal fraud can happen at any time, even in companies with the tightest oversight systems. Risks such as embezzlement, document manipulation, and abuse of authority not only have financial impacts, but can also shake the trust of investors, business partners, and your company’s reputation.
However, many business owners still do not fully understand that this riskcan be diverted through protection fidelity insurance. This is where the role of an insurance broker is crucial—not only helping you choose the right policy, but also assisting you in understanding coverage, assessing risk exposure, and fighting for your rights when making a claim.
From L&G Insurance Broker, we have expertise in helping Indonesian companies identify internal risk gaps and provide solutions.fidelity insuranceOur team conducts a thorough assessment of potential fraud and weaknesses in your internal control system, then recommends insurance products from leading insurance companies that best suit your risk profile and most importantly, do not let embezzlement like this happen.
📞 Contact us at 0811-850-7773– Get a free internal risk assessment and consultation on the most suitable fidelity insurance protection for your business. TogetherL&G Insurance Brokers, protect your company’s trust and integrity with the right and trusted solutions.
