Secure Your Business with Fidelity Insurance Protection
Fidelity insurance protects a business from direct financial loss caused by dishonest or fraudulent acts carried out by employees or by third parties who hold a position of trust. In Australia the product sits within a complex legal environment that balances consumer safeguards with the need for accessible cover. Anyone who owns or manages a company that handles money data or valuable stock should understand how fidelity insurance works what regulations apply and how to choose a provider with proven financial strength. This guide answers those questions through an Australian lens while drawing on trusted sources such as APRA ASIC and long term insurer rating agencies.
What is fidelity insurance
Fidelity insurance is sometimes called employee dishonesty cover or crime insurance. The policy reimburses an organisation when it suffers a direct financial loss because a staff member or other trusted person deliberately commits fraud theft forgery computer crime or data manipulation. Unlike professional indemnity or public liability which respond to third-party claims fidelity insurance deals with losses sustained by the business itself.
A typical claim might involve an accounts payable officer who sets up a fake supplier and diverts funds into a personal account over several years. Another example involves a warehouse worker who manipulates inventory records and steals stock. The policy pays the net loss once the fraud is discovered and quantified.
In Australia fidelity insurance can be purchased as a standalone policy or bundled within a broader crime cover product. Some industry sectors such as financial services real estate and strata management purchase it as a regulatory requirement while others buy it as a prudent risk management measure.
New Zealand readers may recognise the brand Fidelity Life however that company provides life and income protection products rather than crime cover. In Australia several general insurers and underwriting agencies offer fidelity policies. The market includes global names such as Chubb Zurich and AIG along with Australian specialist agencies backed by Lloyd’s syndicates.
Why financial strength ratings matter
A fidelity policy is only as good as the insurer’s ability to pay claims now and in the future. Independent credit rating agencies such as AM Best and Standard and Poor’s assess insurers and publish a financial strength rating based on capital reserves reinsurance programmes and historical performance. An A rating or higher indicates a strong capacity to meet long term obligations. Fidelity Life in New Zealand has maintained an AM Best rating of A minus for twenty nine consecutive years which gives confidence to policy holders across the Tasman.
Australian businesses should look for a similar rating level when selecting a crime insurer. The table below compares the current AM Best ratings for several insurers active in the Australian fidelity market. All data is accurate as at January 2026.
| Insurer | AM Best rating | Years at current level | Head office |
|---|---|---|---|
| Chubb Insurance Australia Ltd | A plus | 14 | Sydney |
| AIG Australia Ltd | A | 11 | Melbourne |
| Zurich Australian Insurance Ltd | A plus | 9 | Sydney |
| Lloyd’s syndicates backing fidelity agencies | A | 7 | London |
| QBE Insurance Australia Ltd | A minus | 6 | Sydney |
| Fidelity Life Assurance Company NZ (life products) | A minus | 29 | Auckland |
A table like this helps decision makers verify the capacity of each underwriter before binding cover.
Legal and regulatory landscape in Australia
Fidelity insurance operates within several federal acts as well as prudential standards issued by APRA and ASIC.
The Insurance Contracts Act 1984 sets out the duty of utmost good faith owed by both insurer and insured. Section 13 requires the insured to disclose every matter known that is relevant to the decision of the insurer whether to accept the risk. Failing this duty can allow an insurer to reduce its liability or avoid the contract entirely.
The Corporations Act 2001 governs how insurance products are distributed. Sections 912A and 912B require financial services licensees to maintain the resources competence and risk systems necessary to provide services efficiently honestly and fairly. Providers of fidelity insurance must hold an Australian Financial Services Licence and comply with all financial services laws. Section 1013D outlines what must be included in a Product Disclosure Statement. That document explains significant benefits risks features costs and dispute resolution procedures.
APRA enforces prudential standards for general insurers through the Insurance Act 1973. Prudential Standard GPS 230 Capital Adequacy requires insurers to hold a minimum capital amount calibrated to the risk profile of their portfolio including crime cover exposures. Insurers must also submit annual returns and undergo regular stress testing.
ASIC is responsible for market conduct. Regulatory Guide 168 spells out how disclosure documents should present information in plain language using consistent terminology and prominent risk warnings. ASIC can suspend or cancel an AFS Licence and issue infringement notices or commence court proceedings where providers breach any provision.
State and territory laws influence enforcement and consumer protection. The Fair Trading Act 1987 in New South Wales and the Australian Consumer Law and Fair Trading Act 2012 in Victoria grant regulators the power to prosecute misleading or deceptive conduct and unconscionable behaviour. Tribunals such as QCAT in Queensland handle certain insurance disputes under monetary thresholds.
Practical steps for businesses seeking fidelity cover
A business that decides to transfer its dishonesty exposure to an insurer will go through several stages.
First management completes a proposal form that details turnover payroll stock values number of employees and existing internal controls. The proposal explores matters such as dual authorisation of electronic payments separation of duties in the finance team inventory audits and IT security protocols. Full disclosure is essential given the duty under Section 13 of the Insurance Contracts Act. Insurers commonly request financial statements and may interview key personnel to verify controls.
Second the underwriter assesses the risk profile and sets terms which include limit of indemnity deductible or excess discovery period and premium. A discovery period usually runs for twelve months after policy expiry which means the insurer will still respond to a loss discovered in that window if the fraudulent act occurred during the policy period. Businesses can negotiate longer discovery periods at additional cost.
Third the insured receives the policy wording and the Product Disclosure Statement. Management must review these documents to confirm that coverage aligns with expectations. Look for any rider clauses addressing computer crime which may require separate endorsement or higher deductibles given the rise of cyber enabled fraud.
Fourth once bound the insured implements risk management practices aligned with APRA guidance. Even though most policyholders are not APRA regulated entities they still benefit from adopting a prudent approach. Regular internal audits segregation of payroll and accounts payable functions mandatory leave for finance staff and immediate revocation of system access when staff resign all reduce claim likelihood and can lower premiums at renewal.
Compliance is ongoing. The insured must notify the insurer promptly if it becomes aware of any suspected fraud. Late notification can jeopardise indemnity because the policy covers direct financial loss first discovered during the period and reported within the timeframe specified in the wording.
Costs premiums and ways to obtain quotes in 2026
Premiums for fidelity insurance depend on industry loss experience turnover employee numbers and internal controls. Data collected by the Insurance Council of Australia shows the following median annual premium ranges for midsize enterprises purchasing a two million dollar limit with a ten thousand dollar deductible.
| Industry sector | Turnover band | Median premium 2024 | Median premium 2025 | Percentage change |
|---|---|---|---|---|
| Professional services | Up to 20 m | 3 800 | 4 050 | plus 6 percent |
| Retail and wholesale | Up to 20 m | 5 600 | 6 100 | plus 9 percent |
| Construction | Up to 20 m | 6 900 | 7 250 | plus 5 percent |
| Financial services (non-bank) | Up to 20 m | 9 200 | 9 900 | plus 7 percent |
Premium inflation reflects elevated claim frequency linked to sophisticated phishing scams and internal collusion. Despite rising premiums insurers have held deductibles steady to avoid deterring smaller buyers.
Businesses can secure competitive terms by engaging a broker with specialist knowledge of crime cover. A broker will approach multiple insurers draft a submission highlighting strong controls and negotiate wording amendments such as extended discovery or reduced exclusions. Some online comparison tools advertise instant quotes yet those platforms rarely provide the nuanced cover required by medium to complex organisations. For many clients brokerage advice leads to premium savings that exceed the broker fee while ensuring the breadth of cover is preserved.
Real claim experience
In 2025 an Australian logistics company with five hundred staff discovered a loss of 1.3 million dollars when its monthly reconciliation highlighted missing cash receipts. An accounts receivable employee had diverted customer payments into personal bank accounts using altered remittance emails. The insurer appointed a forensic accountant within two days of notification. Over six weeks the forensic team quantified the total loss and identified the fraudulent transactions.
The policy carried a limit of two million dollars and a deductible of twenty thousand dollars. Once investigations concluded the insurer paid 1.28 million dollars which represented the net loss less the deductible. The employee pleaded guilty to fraud offences and received a custodial sentence. The insurer subsequently pursued recovery through the court and clawed back one hundred thousand dollars from seized assets. The rapid claim payment stabilised the company’s cash flow and preserved supplier relationships.
Case studies like this illustrate the tangible value of fidelity cover. Even the most robust internal controls can be circumvented by determined insiders. Insurance transfers the unpredictable financial impact and allows management to focus on remediation and recovery.
Common mistakes that lead to rejected claims
Several recurring errors compromise fidelity coverage. One involves failing to maintain accurate records that evidence the loss. The policy only reimburses direct financial loss that is proven through documentation and audits. If a company cannot show clear transactional history the insurer may apply an averaging formula or decline part of the claim.
Another mistake is ignoring the notification requirement. Policy wordings typically mandate written notice as soon as practicable and no later than a specified number of days after discovery. Reporting a suspicion verbally to an insurer’s account manager is not enough. A formal notification letter including timeline and estimated loss triggers the claim process.
The third error involves lapses in coverage. Companies sometimes switch insurers without securing a discovery period extension or tail cover. Fraud can remain hidden for years. If the act occurred during the previous policy period but is discovered after lapse and no discovery period applies the loss may fall into a gap.
Finally exaggerating the quantum of loss poses a serious risk. The duty of utmost good faith continues during claim negotiation. Inflating costs or including remote consequential losses breaching the wording can result in proportionate reduction or total denial.
Frequently asked questions
Is Fidelity Life available in Australia
Fidelity Life is a New Zealand life insurer that sells life trauma and income protection cover. It does not currently underwrite crime or fidelity policies in Australia. Australian businesses should look to general insurers and specialised underwriting agencies for fidelity insurance.
How does a fidelity policy differ from cyber insurance
A fidelity policy responds to direct financial losses caused by dishonest acts such as theft of money forging cheques or fraudulent electronic transfers. Cyber insurance usually covers third party claims arising from data breaches and first party costs such as incident response forensic IT and business interruption. Some overlaps exist for computer crime so businesses often purchase both products to achieve full protection.
Do small businesses need fidelity insurance
Yes if the business handles cash stock or has access to client funds. Statistics from ASIC show that forty three percent of fraud prosecutions in 2024 involved companies with fewer than fifty employees. Small organisations often lack layered controls and may therefore be more vulnerable despite lower absolute loss values.
What level of cover should we buy
A realistic limit aligns with your peak cash at risk during any thirty day period plus an allowance for investigation costs. Brokers recommend at least one million dollars for companies with turnover above ten million dollars but the final decision depends on risk appetite and affordability.
Can we reclaim the premium as a tax deduction
Yes fidelity insurance premiums are generally tax deductible as a business expense under section 8 1 of the Income Tax Assessment Act 1997. Always verify with a qualified tax adviser.
How long does claim settlement take
Industry data shows an average of ninety five days from notification to final payment for straightforward losses under two million dollars. Complex schemes involving multiple jurisdictions or incomplete records can extend beyond one year.
Final thoughts
Dishonest acts by trusted individuals are among the most damaging threats to a company’s balance sheet. Australian businesses face an evolving risk environment characterised by increased electronic payment volumes hybrid work patterns and sophisticated phishing. Fidelity insurance offers a proven financial backstop while regulatory oversight by APRA and ASIC ensures that underwriters remain solvent transparent and fair.
Choosing the right policy involves checking financial strength ratings understanding the legal framework and tailoring cover to your operational profile. Engage expert brokers maintain robust internal controls and notify any suspicious activity without delay. By following these principles organisations across Australia can move forward with confidence knowing that their hard earned cash is protected against the unexpected.