Preventing Internal Loss: How Fidelity Guarantee Insurance Shields Your Business from Employee Fraud
While cybersecurity and external threats dominate most business risk discussions, internal fraud by employees remains one of the most common— and costly—risks faced by businesses. Whether it’s embezzlement, falsifying financial records, or unauthorized transfers, internal theft can quietly drain your resources and damage your reputation.
That’s where Fidelity Guarantee Insurance comes in. This policy helps businesses recover financial losses caused by deliberate acts of dishonesty by employees, ensuring stability in the face of betrayal.
How Does the Coverage Work?
When you take up fidelity guarantee coverage, you’re essentially ensuring that if a trusted employee steals from your company, you’ll be compensated for the loss—subject to the terms and limits of your policy.
Typical Coverage Includes：
- Direct financial loss from forgery, embezzlement, or dishonest conversion
- Acts committed during employment and discovered during or shortly after termination
- Optional inclusion of auditors’ fees for investigation-related accounting
- Blanket or named employee protection
Examples of Employee Fraud Covered
- Theft of Company Funds – An accounts executive skimming cash receipts over several months.
- Falsified Transactions – A branch manager authorizing fake supplier
- Inventory Misuse – A warehouse clerk quietly redirecting stock for personal resale.
- Internal Collusion – Multiple employees collaborating to forge financial
Real-World Impact: One fraudulent act by a senior-level employee could cost a company hundreds of thousands in losses. Without insurance, the financial hit is absorbed entirely by the business.
Key Exclusions to Note
- Any losses not directly tied to dishonest acts (e.g., poor investment decisions)
- Indirect or consequential losses (e.g., lost business reputation or opportunities)
- Inventory discrepancies without specific proof
- Delays in reporting or failure to follow claim procedures
How Claims Are Handled
To make a successful claim:
- Notify your insurer as soon as fraud is discovered Provide a detailed statement of loss and evidence
- Cooperate with law enforcement or internal investigations Allow access to accounting books and employee records
Most policies require the fraud to be discovered within 6 months of the employee’s resignation, dismissal, or death.
Who Should Consider This Coverage?
✅ Businesses handling cash, stock, or sensitive financial data
✅ Companies with large teams, especially in finance, logistics, or sales
✅ Any organization where one employee has control over transactions or funds
✅ SMEs and corporations looking to strengthen their internal risk framework
The Bottom Line: Trust But Verify—With Protection
Fidelity Guarantee Insurance is your last line of defense when internal control systems fail. It’s not about assuming the worst—it’s about being prepared if the worst happens.
Protect your business today against the inside risks you can’t afford to ignore.
KH Chew is the Founder and Risk Advisor of Minaris, with over 30 years of experience in the insurance industry. He holds a Diploma in Insurance from the Malaysian Insurance Institute (MII), which laid the foundation for his in-depth expertise in property, financial lines, and other general insurance products. He is widely recognized for developing tailored insurance schemes for professionals and businesses across Malaysia. KH is also a passionate advocate for risk management and regularly advises clients and trade associations on comprehensive coverage strategies.