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March 5, 2009 Thursday 03:22 PM EST

468 words


Marsh: E-Commerce, Recession Feeding Fraud

Robert O'Connor

LONDON

Growing economic difficulties, coupled with the importance of the Internet as a means of payment and collection, are creating increased opportunities for fraud, global insurance broker Marsh is warning.

Expect an increase in white-collar crime as well as significant changes in how fraudsters operate, said Dean White, managing director of Marsh's Financial and Professional Practice. White was citing a global fraud report issued by Kroll, a risk consultancy owned by Marsh's parent, New York-based Marsh & McLennan Cos. (NYSE: MMC). Given the anticipated conditions, Kroll expects an increase in full-scale fraud investigations involving legal disputes, regulatory action and prosecution in 2009 as whistleblowing also becomes more common.

Reflecting the tendency of fraud claims to increase during a recession, anti-fraud premiums for financial institutions are going up by 20% to 25%, he said. "For the corporate entities, we're seeing premiums starting to nudge up, but by a lesser degree," White said.

The Kroll report found that, especially during this recession, fraud could be the difference between financial survival and bankruptcy or insolvency for companies in every sector.

White tries to promote "fraud awareness" with clients. Deterring fraud is no longer just a matter of being on guard against "the enemy at the gate. That gate could be in any country at any time," he said.

The creation of effective controls, White said, should be followed by enlisting employees in the fight against fraud, to the point where they are willing to report it. "We need to have more of a whistleblowing culture," White said.

White urges clients to look at their likely risk potential and consider how insurance might be able to provide an answer. A policy that is promoted as comprehensive, White said, may not meet the needs of today's environment.

The motivations of those who steal at work can also vary, White said. An employee who is trying to clear a gambling debt could become ensnared with organized crime, he said. A purchasing agent may agree pay the highest price for low-grade supplies and pocket the difference. Or, a supervisor may falsify sales figures to avoid employee layoffs.

Many policies are based on the assumption that fraud will involve the theft of goods of money, White said.

"Are the policies robust?" White would ask a client. "Do they meet your expectations?"

Companies should also carry out annual due diligence to improve their chances of collecting against their insurance policies, White said.

Marsh & McLennan Cos. is the second-largest broker in the world based on 2007 brokerage revenue, according to the Best's Review ranking of global brokers.

To listen to the full interview with Dean White visit www.bestdaynews.com

(By Robert O'Connor, London editor: Robert.OConnor@ambest.com)

March 6, 2009

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