How Fidelity Guarantee Insurance Protects Your Business from Dishonest Employees?

Are all your employees honest?

I certainly hope so.

However, you should recognize that despite your best effort in recruiting the best and most honest employee in your business, you might make a mistake.

The good news is that even if you make a mistake, you are not the only one.

In 2014, KPMG and SMU published a study that more than a quarter of Singapore companies has experienced fraud in a 2 year period. 58% of these frauds are committed by employees.

Employees Fraud Study 2014

Source: KPMG-SMU Fraud Survey 2014

So, how can you manage the risk of dishonest employees?

Having a sound internal control system combining with fidelity guarantee insurance is the best strategy.

In this article, we will introduce you fidelity guarantee insurance, and tips on improving your internal controls to manage this risk that every business will face.

What is Fidelity Guarantee Insurance?

Fidelity guarantee insurance is a guarantee by the insurance company to indemnify your loss arising from employees’ dishonesty.

Examples of losses arising from employees’ dishonesty include:

  • Theft of cash register’s monies
  • Misappropriation of the business’s cash for the employees’ personal gain
  • Theft of the business’s inventory

Types of Fidelity Guarantee Insurance

There are 4 types of fidelity guarantee insurance:

Individual Policy

The individual policy covers an individual employee for a prespecified amount. Once the dishonesty has been discovered, you should report the discovery within 24 months.

Collective Policy

The collective policy, as the name suggests, covers a group of employees. Based on each employee’s position and responsibilities, you will decide the amount of guarantee required.

Floater Policy

The floater policy is similar to the collective policy. The difference is that only one amount of guarantee is given across a group of employees instead of different guarantee amount. Usually, you need at least five employees to be covered under floater policy.

Blanket Policy

The blanket policy guarantees a group of employees, for e.g. employees who manage cash, without the names of the guaranteed person. The guaranteed amount can be in terms of each employee or on the amount of loss. Blanket policies are usually issued to more established businesses with sound internal controls.

Exclusions of Fidelity Guarantee Insurance

As with most other insurance, there are some exclusions to fidelity guarantee insurance. Some of the common exclusions are:

  • Change in the nature of your business;
  • Change in responsibilities or salaries of your employee who are covered under the insurance;
  • Losses that are not backed by evidence due to bad accounting system;
  • Third-party losses;
  • Losses resulting from negligence, extortions, and blackmails;

Understanding the exclusions of any insurance is important to you as a buyer. You would not want to do anything that might result in not being able to claim your insurance. Always consult your insurance agent or company if you are in doubt.

Who is Fidelity Guarantee Insurance for?

As long as you have employees handling cash or processing payment, fidelity guarantee insurance will be useful for you.

However, the following businesses will benefit from fidelity guarantee insurance more:


Unless you are manning your cash register all the time, if not, you will face the risk of someone else stealing money from the cash register.

Restaurants and Cafes

Similar to retailers, restaurants and cafes are more vulnerable to dishonest employees. In fact, theft is one of most common risks that a restaurant owner faces. With the high turnover in the Singapore F&B industry, it is getting more difficult to hire honest and competent employees.

Key Factors to Consider When Buying Fidelity Guarantee Insurance

Use Internal Controls to Prevent Dishonest Acts

One of the best way to manage risks of dishonest employees is to set up proper internal controls within your business.

The internal controls should aim to prevent dishonest acts. If the dishonest acts happen, you also should be able to detect them.

Cash Management Process

The following tips are useful in the cash management process:

  • Ensure proper handing and taking over of the cash register. Schedule a handover in the presence of the manager, and ensure both handing over and taking over casher verify the cash amount.
  • Reconcile your records daily. Always reconcile the beginning cash, transactions for the day and ending cash.
  • Always provide your customer with a print receipt. A print receipt represents a transaction recorded in your business’s system. This transaction will be useful to verify the correct ending cash.
  • Keep big notes in a safe. Transfer big notes to a secure area regularly. The cashier most probably does not need these notes anyway.

Payment Process

Payment is one process that is most vulnerable to fraud. To reduce the possibilities of fraud, you can implement the following:

  • Separate key duties. Separate the duty among those who approve payee (or suppliers), and those who make the actual payment. For example, an employee who is in charge of making payment, cannot approve or add suppliers in the payment system. This prevents the employee from adding himself (or related entity) as the payee, then pay himself using the business’s cash.
  • Require mandatory block leave. Most fraudulent acts require the dishonest employees to maintain daily so as to keep the records clean. By making leaves compulsory, your employees will realise that they will get caught by their colleagues during their leave.
  • Require additional cheque signatories. If you use cheques in your business, you may want to designate additional signatories beyond a certain amount.
  • Require additional approval in internet payment. Similar to issuing a cheque, you may want to designate additional approver beyond a certain threshold for internet payment.
  • Maintain proper records. Make sure that you maintain records on the payee, the amount paid, initiator, approver, and the reason for all your payments. This information will be useful when you are conducting a check.

With these internal controls in place, not only you will minimize the possibility of dishonest acts, but you are also in good position to negotiate for lower fidelity guarantee insurance premiums.

Cost of Fidelity Guarantee Insurance

The cost of fidelity guarantee insurance are based on the following factors:

  • Guarantee amount
  • Number of employees insured
  • Deductibles
  • Your internal controls

Feel free to contact us for a quotation.

Please note that fidelity guarantee insurance is usually offered as part of the general business insurance package. The package also includes other insurance like public liability insurance, product liability insurance, work injury compensation insurance, etc.

Choosing the Type of Fidelity Guarantee Insurance

You should identify which process requires fidelity guarantee. The more common processes are cash register management, payment process, and stock-taking process.

Depending on the number of employees involve in these processes, and your business requirements,  you will have to select the most suitable type of fidelity guarantee insurance.

If you have trouble figuring it out, please do not hesitate to contact us.

Reputable Insurance Company and Agent

You should buy your insurance from a reputable insurance company. An experienced insurance agent like Anthola can also advise on your insurance needs based on your business requirements.


You can never prevent dishonest acts from your employees. With fidelity guarantee insurance, at least you will be able to recoup some of the losses.

Every business is different. If you are interested in buying a fidelity guarantee insurance, please give contact us. We love to speak to you!

Contact Us for Free Consultation

Or call us at +65 6298-6222.