The 2016 Hiscox Embezzlement Study: a Report on White Collar Crime in America

Hiscox Survey Finds Professional Services Industry Faces Highest Median Loss of Any Industry as a Result of Employee Theft; Small and Mid-Sized Businesses and Organizations Are Most Likely to Be Impacted by Embezzlement

NEW YORK, NY -- July 12, 2016 - Hiscox, the international specialist insurer, today released the 2016 Hiscox Embezzlement Study, a comprehensive study of employee theft in the United States. According to the report, 17 percent of employee theft in organizations with fewer than 500 employees occurs in the financial services industry, the highest of any industry examined. In the past year, the median loss for professional services as a result of employee theft was $615,101, the highest loss of any industry. Further, the study found that embezzlement is not just a problem for large organizations or the financial and professional services industry. In fact, small businesses with fewer than 150 employees were 10 times more likely to be victimized by fraud than those with 250-500 employees.

The 2016 Embezzlement Study utilizes employee theft cases that were active in the US federal court system in 2015, specifically those cases occurring in companies with fewer than 500 employees, which represents 69 percent of all federal cases.

"The impact of employee theft can rock an organization to its very core," said Doug Karpp, Crime & Fidelity Product Head at Hiscox. "There is of course an obvious financial impact, but the ripple effect of employee theft threatens the trust employers place in their teams and damages morale."

Why Good People Go Bad 
Perpetrators are often people who are smart, well-liked, and those whom you'd least expect. There are, however, four driving factors that can turn a trusted employee into a criminal, including pressure, opportunity, capability and rationalization(1).

Pressure: An employee is put into a situation which, seemingly, can only be relieved by additional funds. This pressure often results from gambling, investment, or business losses; medical expenses; or significant debt.

Opportunity: Employers should be particularly watchful of employees who have the opportunity to embezzle. More senior, trusted employees, for example, may be more likely to have access to secure files and authority of controls, providing more opportunities to fix the books and cover up their crimes without detection.

Capability: Embezzlers are also often the ones who have the skills and knowledge to commit fraud.

Rationalization: Perpetrators often rationalize their crime by convincing themselves they are providing for their family, feel underpaid or that they were not treated well, or think others are stealing, too.

"Understanding the reason why employee theft happens and the psychology of a potential perpetrator are the first steps to mitigating fraud," said Karpp. "Once you understand that, enacting controls will help manage exposure for businesses of all sizes."

Profile of an Embezzler
Data from the 2016 Hiscox Embezzlement Study reveals several common traits of a 'typical embezzler.' According to the report, the median age of an embezzler was 49, and women represented more than 56 percent of perpetrators.

The data shows that most instances of employee theft involved bookkeepers, which accounted for 11 percent of all cases. A quarter of all employee theft schemes were perpetrated by employees in senior roles within the organization. Senior level executives left the most punishing mark on the organization with their theft, orchestrating schemes with a median loss of $966,000. The healthcare industry has the highest percentage of managers who embezzled, with 65 percent of fraud cases perpetrated by those in a management position. Among municipal governments, there were slightly more managers (63 percent) than employees (38 percent) who embezzled, but the median loss for schemes perpetrated by managers was nearly three times as high.

Every Company is Vulnerable
US organizations with up to 500 employees experienced a median loss of $341,710 per year due to employee theft. Although the sizes and types of theft vary by industry and region, small businesses were found to exhibit higher instances of embezzlement overall. Over 80 percent of thefts occurred at companies with fewer than 150 employees, and just under half had fewer than 25 employees. In both small businesses and large organizations, funds theft is the most common scheme in nearly every industry.

For business owners, Hiscox recommends the following best practices for fraud prevention: 1) Never give one-person end-to-end responsibility for accounting or accounts payable; 2) Pay attention to employee lifestyles; 3) Conduct lawful background checks; 4) Educate employees; and 5) Promote a culture of trustworthiness and integrity.

Hiscox USA provides a variety of specialty risk solutions including a broad spectrum of professional E&O, GL, cyber and data security, media liability, management liability, crime, kidnap & ransom, terrorism and commercial property insurance products. The Hiscox American Courage Index™ is the first survey to track personal and professional courage across the United States.

In the U.S., Hiscox has offices in New York, NY; Atlanta, GA; Chicago, IL; Dallas, TX; Los Angeles, CA; San Francisco, CA and White Plains, NY.

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Related materials: Full 2016 Hiscox Embezzlement Study

About the Report:
All information for The 2016 Hiscox Embezzlement Study was derived from publicly available data regarding nearly 425 US federal court cases in which employee fraud was alleged that either became publicly known or were active in the federal system during 2015. Sources included public announcements from the Department of Justice, Federal Bureau of Investigations, company websites and press releases, and common news aggregators.

Analysis is based exclusively on entities with fewer than 500 employees, which represented 69 percent of all such federal actions related to employee theft. For the purpose of calculating percentages, we excluded cases for which the relevant information was unavailable or the findings were deemed statistically insignificant because the pool of cases had fewer than 10 cases. Where available, in calculating total loss to an organization, we included any legal, accounting or other costs incurred by the organization to uncover the fraud. In several instances, perpetrators utilized more than one scheme to defraud employers. In cases of multiple schemes, we listed as primary the scheme that resulted in the greatest loss to the organization or most often was used by the perpetrator.

Additional information can be found at and

Follow Hiscox USA on Twitter @Hiscox_USA.

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For further information, please contact:

Kate Dillon 
212-279-3115 x115
[email protected]

About Hiscox in the U.S.
Hiscox, the international specialist insurer, is headquartered in Bermuda and listed on the London Stock Exchange (LSE: HSX). There are three main underwriting parts of the Group - Hiscox London Market, Hiscox UK and Europe and Hiscox International. Hiscox International includes operations in Bermuda, Guernsey and the USA. Hiscox Syndicates Ltd is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. The ability of syndicates at Lloyd's to do business in the USA and its territories is restricted as they are not US-based insurers. The publication and delivery of this information are not intended to be a solicitation by Lloyd's for the purchase of insurance on any US risk. Hiscox Underwriting Limited and Hiscox ASM Limited are authorized and regulated by the Financial Conduct Authority.

Hiscox Inc., a Delaware corporation headquartered in New York, d/b/a Hiscox Insurance Agency in CA, is a licensed insurance intermediary for admitted and surplus lines business. Hiscox Inc. underwrites on behalf of, and places business with, Hiscox Insurance Company Inc., other domestic insurers, and syndicates at Lloyd's ( Hiscox Insurance Company Inc. is a Chicago, IL domiciled insurer which is admitted or licensed to do business in all 50 states and the District of Columbia.

 1  Thurston, Jack. “How do embezzlers justify their crimes?” WCAX News. 29 March 2011.