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Comment by monocasa | Hacker News Reader

They report everything missing that wasn't sold when they do inventory at least once a week so they can get reimbursed from their insurance and so they can be restocked. It's no additional work for a store.

These are "shrink" numbers not police reports.

Source: former front end/grocery manager for a grocery store.

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The purpose of insurance is not to reimburse an expected loss. The insurance rates will promptly go up to cover these losses. Insurance companies are not charities. Ultimately, the losses will be borne by the business, and then their customers.

Which is why the stores use it as a service to mainly to account for a big robbery, and the insurance is OK with pretty close to a wash on the day to day in order to have way more data for their actuaries.

I had close friends working in retail / warehouses who told the worst stories but I've never heard about insurance scams.

If this was possible, more and more businesses would do it, increasing the cost of insurance (for the insured and for everyone else in their business) until what you pay in insurance balances out what you scammed for.

Sure, maybe one store could do it and get a bit more money than competitors or maybe they just all claim a little bit, part of which is real shoplifting, part is wrong data (whether intentionally wrong or not). Considering insurances are still standing and making more money than ever, what you say can't be more than anecdotal.

That's the whole point of essentially opening your books to the insurance company on as a regular a basis as corporate sees. They're a lot better than corporate at noticing 'systemic irregularities' that correspond to org charts, and have a financial interest in rooting them out. And insurance knows this and so gives you a better rate on it all because of the 'close relationship'. Additionally corporate typically values smooth revenue streams over strictly maximized revenue streams which is why they have insurance for shrink in the first place.

I don't see the benefit to a major retailer chain to even buy insurance. Are we sure they do? Insurers would simply look at Walgreens' specific loss amount and charge them that same number plus overhead and profit.

In Silicon Valley speak: RAaaS - Risk Aversion as a Service. Most retail runs on pretty thin margins so simultaneous robberies means a low quarter which means someone's head on a platter at corporate. It's a wash on the day to day, and the insurance comes out ahead on a big robbery because of the premiums, but the corporate keeps it's numbers versus the previous year.

It's mainly an accounting hack with little value to negative value for the company as a whole after your company reaches a certain size, I agree. There is the classic idea insurance idea that because retail runs on thin margins, keeping the money flowing is important so the whole house of cards doesn't fall down from a huge decrease at an inopportune time, but the relationship stays around way longer than is necessary because of the social organizational effects above, IMO.

Commercial insurance often covers theft but not shoplifting.

At least locally, these stores would be uninsurable even if coverage was offered. Insurance companies are not idiots. "Insurance" is not intended for ongoing steady losses, but irregular hard to predict losses.

Are you sure this was insurance paying? Did you ever see a claim form?

Many businesses do have a shrink budget, and if corp doesn't want action taken (ie, no stops) a local store can claim back shrink to be fair to its local managers in terms of their numbers.

I didn't see the initial claim forms, but I was involved in the dispute processes.

And like I've said below, insurance isn't an idiot here. They come out ahead on pretty much every situation, either as a wash for money but with way more data for their actuaries, or they increase premiums if larger robberies occur more frequently. 'Insurance always comes out ahead' is a great axiom to live by.

no work in filing the forms for the insurance? no increased insurance cost? no extra work re-stocking?

Yeah, it's all automated. You have to go through the whole store and mark what you have at least once a week. The system internally matches that against what the cash registers sold, and then makes an order for new stuff and corporate runs a report and submits that to insurance. It's all pretty orthogonal to if anything was actually stolen or if there was just process mistakes like saying 4qty for something when each was a different flavor/SKU or something.

I doubt that any insurance will cover it considering you can't prove missing inventory was stolen vs misplaced vs fake inventory on the computer unless you have the thieves check out as they leave. Also insurance is to hedge against unusual and infrequent occurrences, while inventory shrink is a normal feature of a store. Like the insurance company would have to charge more than the inventory losses to make it work for them.

I mean, you'd be wrong. B2B insurance doesn't look like B2C insurance.

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