Tough economic conditions are fuelling commercial crime in SA
Commercial crime is on the rise in South Africa, as many people seek to maintain their lavish lifestyles amid tough economic conditions, meaning that businesses need to be particularly vigilant and give serious consideration to protecting themselves against these risks.
Commercial crime refers to theft, fraud or dishonesty committed against a business by an employee that results in the business suffering financial loss. In difficult economic times, one of the easiest ways for employees to maintain the standard of living that they are accustomed to is to breach business protocols.
“We are seeing high inflation, rising interest rates, as well as climbing fuel and food prices. The average South African is financially stressed and many people are becoming desperate,” says Gizelle Pereira, Commercial Crime Product Head at iTOO Special Risks.
“With tough times come long fingers. Once an employee breaches businesses protocols, it becomes easier for them to do it again and again. So, commercial crime can go undetected for a very long time, only for a business to discover that it has lost a huge amount of money when the crime is finally detected.”
According to crime statistics released by the South African Police Service for the second quarter of 2022/23, commercial crime increased by 19.9% year on year, with more than 28 000 commercial crime cases reported between October and December last year.
Difficult to prevent
“Unfortunately, commercial crimes are very hard to prevent. Where there is a loophole, criminals will find it. You might have a business that you think will never be hit, but never say never,” says Pereira.
She notes that the South African market has been hard hit over the past 24 to 36 months, with many insurers turning away from actively pursuing the commercial crimes market segment all together. In iTOO’s case, the company has seen claim amounts doubling during the past five years, from an average of R5 million per claim to R10 million.
“This just goes to show that criminals have changed their tactics to stealing big amounts once off, instead of taking smaller amounts at a time. A big loss like this could put many companies out of business, which demonstrates the importance of protecting your business with a commercial crimes insurance policy,” says Pereira.
With South African businesses facing a slew of commercial crimes coming at them from different quarters, it is understandable that business owners need to manage the risks associated with commercial crime and many are seeking to protect their businesses by way of commercial crime insurance.
Unlike many of its competitors, specialist insurer iTOO decided to stick it out in this market, continuing to write this class of business. The company did, however, institute more stringent underwriting conditions and criteria.
“Over the last 24 to 36 months, iTOO has dissected its commercial crime book of business and put in place underwriting guidelines and criteria. Essentially, this has been the result of the state of the local and global commercial crime market, at this point in time.”
As such, Pereira says that iTOO has managed to successfully navigate this market segment, which is now once again becoming a viable market.
“As part of our commercial crimes offering, we’ve teamed up loss adjusters to do risk assessments for businesses on the risks they face and help the business owner to make it as criminal-proof as possible. For instance, we might look at a procurement department, find potential loopholes and make recommendations about how to address them,” says Pereira.
Commercial crime insurance coverage is vitally important for South African businesses, especially at a time when such crimes are on the increase and the potential threats can be found within the organisation, often in the guise of employees who have been with the company for years.
