Required Conditions Under the Crime Policy
Chubb Insurance, the insurance company who writes your Crime Insurance Coverage, have some basic risk management rules and guidelines for the entities under your organization’s national insurance policy. These conditions are referred to as ârequired conditionsâ and list out specific requirements in the financial management to ensure that there is dual control of the financial transactions at all times. Should an embezzlement occur and the dual controls were indeed in place, then the entity would only have to absorb a lower deductible (refer to your Insurance Overview for your organization’s embezzlement limits and deductibles). However, should a claim occur and no dual controls were employed, then the per occurrence deductible would be $150,000 per occurrence.
This requirement by the insurance company hopes to serve two purposes:
- To encourage stronger financial management by all entities of a womanâs fraternity/sorority and
- To be punitive to those who donât properly manage the exposure.
Maintaining this coverage is extremely critical for our community comprised of primarily volunteer leadership. Thus, the insurance company has placed required conditions on the policy for insureds to qualify for a lower policy retention (deductible). Required Conditions means the Insured Organizations have utilized, prior to the loss sustained, a professional, third party accounting service* to provide the following controls with respect to any Chapter, Local House Corporation or Local Foundation, which will be verified at the time of loss:
- All outgoing electronic payments are subject to segregation of duties between initiation, authorization and release, such that no one individual can control the entire process without oversight by another individual;
- Accounts payable duties are segregated such that no one person can complete a transaction from beginning to end independently under their own authority;
- Monthly bank reconciliation is conducted on all Chapter, Local House Corporation or Local Foundation approved bank accounts by a person that is not authorized to also handle deposits, sign checks or make electronic payments; and
- At least once a month, bank and credit and purchase card accounts are reconciled by a board member or employee other than the board member or employee who is an authorized signatory for such accounts;
- New vendors or any change to existing vendors are approved by a House Corporation board member.
Click here to see claims examples involving embezzlement that might be useful for determining your various exposures to this type of risk.
We are confident that our clients recognize this risk to financial management and have implemented these required conditions as recommended. Should you have additional questions, please consult with your Client Executive at MJ Sorority.
*We have come to understand that this accounting service is generally being utilized, so it likely will not be a change for your operation. The policy requires the chapters/house corporations/local foundations have a professional, third -party accounting service in place at the time of a loss to qualify for the lower deductible should a loss occur. Examples of this would be an accounting firm or one of the accounting service providers in the fraternal community, such as OmegaFi and Billhighway/GreekBill.