Filed Under:Risk Management, Loss Control

Hiscox finds employee theft costs U.S. businesses $1.13M in losses on average

Financial services take the lead for the highest total loss across industries at more than $120 million for the year. (Photo: Shutterstock)
Financial services take the lead for the highest total loss across industries at more than $120 million for the year. (Photo: Shutterstock)

Small and mid-sized businesses are most likely to be victimized by employee theft, according to the 2017 Hiscox Embezzlement Study.

The annual study, which examines employee theft cases that were active in the U.S. federal court system in 2016, found that U.S. businesses impacted by employee theft lost an average of $1.13 million last year.

Related: What coverage applies to alleged thefts by employees?

Risky indicators

Embezzlers do not pick and choose when it comes to their targets — businesses of all sizes and industries are at risk. While larger companies experience fewer instances of embezzlement — 24% of cases, compared to small and mid-sized companies which account for nearly 68% of cases — they tend to experience a higher median loss compared to small and mid-sized companies ($452,025 versus $289,864). 

According to the study, financial services continue to account for the highest number of cases of employee theft (18%) of any industry examined. 

While no criterion can define a "typical" embezzler, the report points out common characteristics of white collar criminals, such as: 

  • The median age of a perpetrator if 48 years old.
  • Slightly more women than men commit this type of crime (51% versus 49%).
  • Finance and accounting are the most common job functions of embezzlers (37%).

Related: 6 things to know about white collar crime


Funds theft is the most common embezzlement scheme, used in more than one-third of all cases, followed by check fraud (22%). (Photo: Shutterstock)

Scheme structure and breakdown

High-loss cases often result from schemes that repeatedly siphon small sums of money over time to avoid detection. Nearly one-quarter of employee thefts reported involved large-scale losses over $1 million.  

These schemes typically go on for years. 29% of employee theft occurred for more than five years, according to the report; the average loss for cases that continued for five years or more was $2.2 million, and for cases lasting 10 years or more, the average loss was $5.4 million.

Related: Employee fraud: 6 steps to substantiating your claim and recovering losses

Early indicators of an embezzler

While business owners may fault themselves, warning signs are often subtle. However, Hiscox has identified five characteristics to watch for: 

  • Intelligence/curiosity: Embezzlers are often eager to know office procedures so they can manipulate the process for their own gain.
  • Extravagance: Employees living a lifestyle out of proportion to their salary should be closely monitored. 
  • Risk takers: An embezzler is often a ruler break in and out of work
  • Diligence: While coming in early and staying late may present a dedicated worker, it could be a front to keep from being caught. 
  • Disgruntled: An employee who feels they are being unfairly may attempt to steal to 'even the score.' 

While it may seem impossible, there are practices companies can take to manage employee theft. Hiscox recommends instituting a system of checks and balances, insuring your business, pressing charges and letting go of the perpetrator.

See also:

How to insure against employee dishonesty

Fairway employee arrested after allegedly defrauding company for more than $1 million

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