Cost of Living, Economic Pressure and the Rise of Employee Theft

If you look around, whether it’s at friends, colleagues, clients, or even yourself, the same phrase keeps popping up: “It’s tough out there.”

The cost-of-living crisis has left very few untouched. Rental payments are climbing, groceries are costing more every week, small luxuries are being cut back and whilst mortgage repayments may have eased slightly, they are still consuming a huge portion of household income. It’s not just individuals feeling the pinch either; businesses across every sector are battling rising costs and tighter margins.

In times like these, other challenges start to quietly creep in.

When Cost Pressures Collide with Human Behaviour

Throughout my career as a broker, advising on management liability insurance for over a decade, I’ve seen firsthand how economic pressure can turn into business risk. Specifically, employee fraud and theft.

Now, let’s be clear: most employees are trustworthy, hardworking people. But history shows us that when financial pressures mount, incidents of theft and fraud tend to rise. 

I’ve worked with businesses that had all the right checks and balances in place, yet they were still blindsided. The losses? Anywhere from $15,000 (enough to seriously dent cash flow) to over $1 million (enough to threaten a business’s survival). Sometimes the theft ran for months, or even years. And often, the perpetrators can be a total surprise to the business.

Why? Because the individuals behind this behaviour are often skilled at hiding it. They possess the ability to act completely normal while systematically draining a business from the inside.

Controls Are Essential! But They’re Not Foolproof…

Businesses invest heavily in systems, segregation of duties and financial controls to stop fraud before it starts; while those controls are critical, they’re not a guarantee.

Why? Because controls are designed by people… and people - by nature - can be influenced, misled, or overly trusting.

That is why I always emphasise: controls form your first line of defence, but insurance provides the essential safety net when those defences are breached.

Management Liability Insurance

Management liability insurance is designed for these unfortunate situations. It protects businesses and their directors against risks that can’t always be managed by good governance alone. One of its critical protections is against employee theft, often referred to as fidelity cover.

In today’s environment, where financial pressures weigh heavily on both households and businesses, these risks are only intensifying.

Consider this analogy: you wouldn’t drive without insurance simply because your car has airbags and seatbelts. In the same way, relying solely on internal controls without management liability insurance leaves your business exposed. This cover ensures that when the unforeseen happens, you’re not left to face the consequences alone.

Final Thoughts

The cost-of-living crisis is impacting us all - but for businesses, the hidden cost can be devastating if theft or fraud takes hold.

I’ve seen the best-run businesses fall victim to it! While you can’t always predict human behaviour, you can put the right protection in place.

If you’d like to understand how management liability insurance could provide you with better peace of mind for your business, reach out to the team at Sage Insurance. We specialise in protecting businesses from the risks you don’t always see coming.

Because sometimes, it’s the unexpected that leaves the biggest mark.

Jasmin Gabrielli

Jasmin is an experienced insurance professional with over 11 years of general broking expertise across a diverse range of general and hard-to-place specialty lines specifically in commercial applications.