Commercial Crime Insurance
Embroker helps you get commercial crime insurance to protect your business from losses due to crime-related issues such as petty theft, fraud, and burglary committed by both your employees and outside entities.
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What Is Commercial Crime Insurance?
Commercial Crime insurance can help protect your company from significant losses caused by both third parties or internal employees. It provides coverage for loss of money or other assets against theft, fraud, forgery, burglary, and more.
First-party coverage protects your business from its own losses that occurred as a result of some type of criminal activity. Third-party coverage protects your business if another business or entity claims that a criminal act perpetrated by your business caused them direct losses.
Although strong internal controls, audits, and a good outside CPA firm can greatly reduce employee theft, even the most vigilant companies have sustained significant multi-million dollar losses. According to a recent report, companies around the globe lost an estimated $4 trillion to fraud in 2017. The right crime policy can safeguard your business from the risk of corporate asset theft to more sophisticated computer and online schemes.
Difference Between Fidelity Bonds and Crime Insurance
Fidelity bonds are a sub-type of crime insurance that will protect your business from fraudulent acts committed by your employees.
Fidelity bonds are often considered similar to crime insurance, but there are some crucial differences. For instance, a crime insurance policy will typically have higher limits, but a fidelity bond could reimburse customers who suffered crime-related damages.
You can learn more about fidelity bonds in this in-depth guide: What’s the Difference Between Fidelity Bonds and Crime Insurance?
Who Is Crime Insurance For?
We advise our clients to consider crime insurance because it’s a simple risk transfer mechanism for theft and manipulation.
Businesses that do the following are more exposed to petty theft:
- Hire part-time employees
- Engage in cash transactions
- Manage inventory
- Have expensive equipment in the office
Companies that deal with the following are more exposed to digital theft and manipulation:
- Customer data
- Digital transactions
- Sensitive financial records
Why Do You Need Crime Insurance?
In order to mitigate this risk, businesses buy insurance directly related to crime. Losses related to criminal acts can be frustrating and costly. In the digital age, manipulation and digital crime can be disruptive and this simple line of insurance can help.
Let’s take a look at some of the most common business crimes that are committed in order to better understand why businesses should acquire a versatile crime policy:
Employee Theft
The type of employee theft that your business is most exposed to will depend on your industry. For example, retailers need to be very aware of shoplifting. According to a FaceFirst study, 36.5% of inventory shrinkage is caused by shoplifting and other types of organized retail crime. In many cases, employees will collaborate with external entities in order to orchestrate shoplifting tactics.
Other more obvious internal types of employee theft include things such as embezzlement, information theft, larceny, and skimming. Employee theft can be as simple as taking money from the cash register when no one is looking and as complicated as forging signatures, inflating expense reports, and funneling funds through fraudulent accounts.
An employee feeding sensitive information to competitors in exchange for money or other assets can also be considered a type of employee crime. For more, read our full guide on employee dishonesty coverage.
Cybercrimes
One common misunderstanding regarding crime insurance is related to computer fraud. Commercial crime insurance will often cover losses in which employees or third-party hackers committed fraud or theft via computers, but crime insurance will typically not cover losses as a result of data breaches. This is covered separately, under your cyber liability insurance policy.
If you’re concerned about digital theft, manipulation, and attacks, we encourage you to explore both crime and cyber insurance concurrently.
The biggest difference between cyber liability and commercial crime coverage is that a crime policy will cover your direct loss of funds while a cyber liability policy will cover the economic damage that results from data breaches and other types of cyberattacks that could lead to indirect financial losses.
For more on fraud protection, read our full article on creating a fraud prevention plan.
What Does Crime Insurance Cover?
At the most basic level, crime insurance typically covers dishonest acts like petty theft and funds transfer fraud committed by part-time staff, volunteers or contractors, property damage, and burglary.
As the digital world has evolved, so has crime insurance. Now crime insurance can also cover digital crime, including theft of business information, money or property by hackers or con artists.
This often includes acts of forgery, and any instances of counterfeiting and impersonation that can do harm to your business.
For more examples of coverage, read our full article on commercial crime insurance claims examples.
Discovery vs. Loss Sustained Coverage Difference
An important decision to make when considering crime insurance is when do you want the policy to be triggered. There are two types of available triggers for the crime insurance policy: a discovery trigger and a loss sustained trigger.
A discovery coverage policy will provide insurance for losses that are discovered during the policy period. It doesn’t matter when the crime actually occurred, only when it was discovered.
Loss sustained coverage will only cover the losses that have both occurred and were discovered while the policy was active. In addition to this, the policy will typically allow for an extended discovery period of up to one year, during which a loss can be discovered and reported.
When trying to decide on a policy with a discovery trigger, keep in mind that crime losses may take a long time to discover and can occur over an extended period of time.
What’s Not Covered?
As is the case with every type of insurance policy, there are common exclusions in crime policies that limit coverage.
Some of the most common crime insurance exclusions include:
- Loss of income
- Indirect losses
- Crimes committed by executives
- Crimes committed by business partners
- Crimes committed by employees in coordination with business partners
- Third-party liabilities arising from crime-related losses
- Cybercrime-related losses such as lost patents, trade secrets, customer lists
- Exposures covered by other insurance policies
However, there are certain things that can be covered through a variety of enhancements and endorsements that can be added to your crime policy such as licensing violation fines and identity fraud expenses.
As always, the best course of action is to talk with an experienced broker to discuss your needs and all of your coverage options when putting together a crime policy that’s right for your business.
What Does Commercial Crime Insurance Cost?
As with all other types of insurance, companies price fidelity bonds and related policies according to business risk and crime coverage amount.
Some common risk metrics include:
Number of Employees
Insurers also consider whether the employees work at the same location or at multiple offices.
Revenue
Companies with high revenue streams generally are more tempting targets for malefactors and have more to lose.
Office Security
Underwriters like to see some basic safeguards, such as a few strategically-located and unobtrusive cameras.
Financial Controls
Underwriters also like to see that there are financial controls in place to protect against manipulation.
High-Value Items
A working prototype of a satellite stored in your office would be high value and could drive premium up significantly.
Businesses looking to save money on commercial crime insurance may look to add coverage to other policies through endorsements. Smaller businesses may add it to their BOP or directors and officers policy. Standalone policies will offer more comprehensive coverage and higher limits but will cost more.
Companies securing fidelity bonds instead of a commercial crime policy will typically have to pay between 0.5% to 2% of the bond value.
For more, read our full article on crime insurance cost.
Why Get It With Embroker?
Easy.
We’ve made it easier than ever before to buy commercial crime coverage. Purchase a policy online and in minutes through our industry-leading digital insurance platform
Affordable.
As a digital company, Embroker helps you save money by cutting out unnecessary administration costs while offering complete yet competitively priced crime coverage
Complete.
Protect your business with broadest commercial crime coverage in the industry. You can tailor your crime policy to the exact needs and risk profile of your business.
Human.
Our experienced brokers are standing by to assist you at all times. Reach us 24/7 via phone, email or live chat. You even get a personal account manager to look after you and your insurance needs.
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Cynthia Nomikos
Pierce & Shearer LLP
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