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Commercial Crime Insurance Guide

Matt McKenna Scale Underwriting
Matt McKenna

Underwriting Manager

With 84% of investigated fraud cases spanning multiple industries, no one sector is exempt from financial crime. Keep in mind; these outlaws aren’t masked bandits robbing a dusty train freighting gold bars. Instead, they’re lounging comfortably in their own homes.

It’s no small task to keep up with the aggressive tactics and innovative technology many cybercriminals employ. From international gangs to crime syndicates to terrorist groups, the risk for economic offenses has dramatically increased. 

IBM’s financial crime and fraud statistics are astounding…but not at all in a positive way.

financial crime and fraud x
Source: The Top 3 Financial Crime Trends Insurers Face Today, IBM Insurance Industry Blog

Protecting your brand, customer confidence, and profits is a crucial part of any modern-day operation. For this reason, here’s everything you need to know about commercial crime insurance.

What Is Commercial Crime Insurance?

Gone are the days where thieves opted to sort through your dumpster in search of vital information. Nowadays, bad actors give fraudulent transfer information directly to employees. Mainly, criminals use stolen information to steal money. 

Although such a simple scheme might seem obvious on paper, it’s a highly effective tactic used by plenty of scammers.

Crime insurance is fundamentally designed to cover money theft. Because fraud comes in various shapes and sizes, commercial crime insurance covers numerous situations, including:

  • Employees stealing money from the company or clients.
  • Inadvertently accepting forged checks or counterfeit money.
  • Non-employees stealing from the company’s office or from the premises of the company’s bank.
  • Robbery of valuables while in transit under the care of a messenger or armored car.
  • Computer and wire transfer fraud.

Why Do You Need Commercial Crime Insurance? 

As mentioned, financial crime can occur in a variety of complicated ways. For the sake of pride, we’d be thrilled to declare that no two scams are alike—except they are. Many similarities exist between scams, schemes, and other tactics. 

Crime complexities might offer comfort to those who’ve “fallen” in the past. Knowing the basics of commercial crime, however, is critical to the success of your business. After all, no one wants to fall prey to criminal activity. Here are a few popular tactics in a criminal’s ultimate playbook.

Social Engineering

In contrast to a conventional and straightforward scam, social engineering represents the intricate intersection of crime and cyber activities. This sophisticated fraudulent scheme entails a series of intricate steps, setting it apart from numerous other forms of illicit endeavors. When considering protection, it raises the question of cyber insurance vs crime insurance.

People are often exploited to gain system access or other vital information useful to carry out the crime. 

Phishing also falls under the umbrella of social engineering. Plus, it’s a tactic you’ve probably seen in real-life hundreds of times. Phishing occurs when a criminal sends an email from what looks to be a valid business. The email typically requests sensitive information, and many employees comply to “fix an urgent problem.” 

Social engineering could even be as blatant as a criminal pretending to be an authority figure (i.e., sending an email as the CEO after hacking their account). Doling out urgent instructions, employees often fail to question the validity of the email’s content. 

Employee Theft

It’s no surprise that organized crime and shoplifting takes the blame for much of inventory shrinkage. Up to 30% of inventory loss, though, is due to internal employee theft, or otherwise known as asset misappropriation. 

Some of the most common types of employee theft include:

  • Larceny
  • Embezzlement
  • Skimming
  • Fraudulent disbursements
  • Information theft

Although employee theft is often as simple as taking cash from the cash register, it could become far more complicated than that. 

To name a few examples, employees could funnel funds through fraudulent accounts, forge signatures, launch billing schemes, or inflate expense reports. Another concerning strategy is for an employee to release confidential business information to a competitor. 

Cyber Crime

Despite it frequently making headlines, cyber crime is anything but harmless. Plus, the number of records stolen doesn’t dictate the amount of damage a data breach can cause. In one instance, a single stolen file was reported to cost $1.5M – $2M in damages.

Fortune 500 companies aren’t the only ones impacted by data breaches. Criminals actually prefer to target small and mid-market companies with less robust cybersecurity programs.. With that said, the average breach cost is well over $500K with financial services and retail taking the brunt of the blow. Furthermore, the legal fees for defense and settlement could quickly skyrocket into the millions. 

Hackers and malware cause significant loss—ransomware making the biggest dent. Unfortunately, ransomware tricks many unsuspecting victims because it appears as a legitimate file. Sometimes, the malware doesn’t even need interaction to travel between computers. 

What Does Crime Insurance Not Cover?

As with most insurance policies, commercial crime insurance isn’t merely a catch-all policy. Exclusions do exist, and it’s crucial to know what crime insurance won’t cover.

For example, crime insurance won’t cover:

  • Criminal acts by executives
  • Loss of income
  • Indirect loss
  • Exposures covered by other policies

Remember, social engineering describes situations where criminals often pretend to be executives to gain access to private business information. When an executive does commit a crime, however, the act falls outside of coverage. 

As imagined, indirect loss or loss that can’t be traced back to a specific crime isn’t covered either. 

Furthermore, commercial crime insurance may cover the following, but you’ll need the right enhancements compared to a typical policy:

  • Virus Restoration / Computer Program and Electronic Data Restoration Expense
  • Licensing Violation Fines and Penalties
  • Personal Accounts Forgery or Alteration
  • Identity Fraud Expenses

Commercial Crime Trends

Nowadays, underwriters often have a difficult time determining risk regarding crime insurance, and therefore pricing, in some regions. Mostly, this trend is because of the sophisticated crimes committed in areas formerly categorized as “good risk” zones. 

For example, the overall crime rate could be low in a region and yet, mounds of cyber crime occurring “under the radar” bumps up the risk level. 

Pricing Trends

As mentioned, one stolen file could cost a company millions of dollars. And, most business policies don’t cover crime-related losses. Many companies opt to add coverage to one of their existing policies as standalone crime insurance is pricier. 

Although plenty of factors contribute to your final number, some elements that may impact your commercial crime insurance premium include:

  • Your industry
  • Security measures (i.e., data monitoring)
  • Value of your business property
  • Number of employees
  • Annual revenue

Criminal Trends

It’s safe to say that the criminal landscape is rapidly changing, becoming more sophisticated and harder to fight. Companies are tightening up defenses to battle complex cyber threats. It’s a good thing, too! Tactics such as phishing are becoming more prevalent daily. 

Criminals are now scouting companies with fractured processes and technology. If your company lacks enhanced IT, you’re a flashing light to criminals, as well. By 2021, cybercrime is estimated to cost the world $6T in damages.

Small businesses are frequently in the crosshairs of criminals. Mainly, cybercriminals target small businesses because of the organization’s culture. In other words, the companies don’t believe cybercriminals will target them. Or, they fail to provide their employees with cybersecurity training.  

In light of the stark facts surrounding commercial crime, it’s vital to arm your business with a broad enough policy to cover any criminal attack. Founder Shield specializes in knowing the risks your operation faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll help you find the right policy for you.

Want to know more about commercial criminal insurance? Talk to us! You can contact us at ​info@foundershield.com​ or create an account ​here​ to get started on a quote. 


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