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Crime Insurance
Crime insurance protects companies from financial loss resulting from third-party or internal dishonest acts (i.e., employee theft, forgery, computer fraud, funds transfer fraud, etc.). Plus, it offers many recovery benefits, supporting investigations, defense costs, and reimbursement for lost assets and company funds.
What Is Crime Insurance?
Crime insurance is a specialty commercial policy protecting businesses against financial losses stemming from criminal acts, such as employee dishonesty, external theft, fraud, or computer crime. It provides a unique combination of coverage options, helping companies manage their risk of loss from criminal activity and mitigate threats before and after a crime occurs. But why?
Crime and fraud risk have been increasing for some time and are more prominent now than ever, with major incidents regularly headlining worldwide news. Massive enterprises and small businesses alike felt the sting of compromised funds or stolen assets. Do you remember recent employee embezzlement scandals? How about when criminals used sophisticated social engineering to trick a company into wiring millions of dollars? Financial institutions and retail stores also experience devastating theft and fraud losses every year.
It’s safe to say that an unpredictable economic climate can send criminals into overdrive, exploiting the slightest internal control failure or external vulnerability. As a result, this dynamic shift has created massive complexities in insuring crime risks. However, crime insurers have diligently evolved crime insurance that provides innovative solutions to these new claims.
Crime insurance is sometimes known as fidelity insurance or commercial crime coverage. First and foremost, it’s first-party coverage, but crime insurance policies can also include coverage for third-party costs, such as client property held in trust. Crime coverage can provide up to four branches of coverage to protect businesses: employee dishonesty, forgery or alteration, theft of money and securities, and computer/funds transfer fraud. As mentioned, crime insurance can provide a unique combination of coverage options.
Crime Coverage
Some commercial lines of coverage provide first-party and third-party coverage, crime insurance included. In today’s complex business environment, nearly every organization benefits from having crime insurance. Criminals aren’t picky about who they target, after all.
Who Needs Crime Insurance Coverage?
Given the significant potential for loss from internal or external crime, companies of all sizes should consider crime coverage a top priority. Criminals scout businesses with fractured processes and technology, executing sophisticated schemes to infiltrate the company’s financial operations or steal assets. Loads of company money, securities, and other property are stolen every year, resulting in direct financial loss, plus investigation expenses and potential legal costs. That said, crime insurance is vital for the following industries:
Healthcare
You handle large sums of payments and sensitive financial data, making you a target for internal and external fraud.
Financial Services
The average cost of a crime loss can be substantial, and financial services are often first on most criminals’ target list for internal theft or funds transfer fraud.
Non-Profits
Losses due to employee dishonesty or forgery can be devastating to public trust and donor relations for this industry.
Manufacturing/Retail
The damage to your cash flow and inventory could cause your company to shutter after a major theft or embezzlement scheme.
What Does Crime Insurance Cover?
You will have to consult your policy documents to confirm exactly what coverage your crime insurance provides but here are a few scenarios that typically would and would not be covered. You can read more about what crime insurance covers here.
Employee Dishonesty
Many policies cover losses caused by theft or embezzlement of money, securities, or property by an employee. They also cover theft of a client’s property held in your care, custody, or control. For a loss to be covered, it must result directly from the dishonest acts of an identified employee or group of employees. This policy generally covers the costs to investigate and quantify the loss. It may also cover the cost of outside experts or consultants you hire to audit your books.
Forgery or Alteration
Many policies cover losses resulting directly from forgery or alteration of checks, drafts, or other written promises to pay money made or drawn by or upon you. The coverage afforded under a crime policy differs from that provided under your general liability policy, which typically excludes claims arising from forgery. Crime policies cover direct financial loss due to the fraudulent instrument.
Computer Fraud Losses
Computer fraud coverage applies when a criminal uses a computer to fraudulently transfer money, securities, or other property from inside your premises or banking premise to a person or place outside. For instance, a criminal may use malicious code or hacking to illegally access your system and initiate a funds transfer. This coverage typically applies to the money or property stolen.
Funds Transfer Fraud
Policies may cover the loss of money or securities resulting from fraudulent instructions purportedly transmitted by an employee directing a financial institution to transfer, pay, or deliver money or securities from your transfer account. This is often the result of social engineering or phishing scams. Some policies cover the cost of hiring an attorney to assess your firm’s obligations under applicable laws and regulations.
Crime Insurance Policy
Crime insurance covers:
How Can I Manage My Crime Policy & Risks?
Insurance carriers continually evolve their crime policies to keep up with an ever-changing risk landscape. However, organizations must do more to meet new prerequisites of crime coverage.
For example, company leaders must rally their workforce to accept more financial responsibility. This approach includes ongoing employee training on recognizing red flags and providing workers with clear, enforced internal controls and accounting systems to complete daily tasks. Crime prevention involves more than mere background checks or strong vaults to prevent a criminal event — though it’s a great start. Instead, creating a healthy financial control culture starts with leaders at the top and trickles down to the team.
While developing a recovery plan is vital, proactive crime prevention measures are now standard. Furthermore, enforcing segregation of duties has become a top priority in recent years, not to mention ensuring mandatory dual authorization for fund transfers. Insurance carriers aren’t as likely to cover your business without these elements in a crime prevention strategy.
Consider your crime exposures, from your cash handling procedures and fund transfer processes to valuable inventory and sensitive financial data. By thoroughly analyzing your crime risks, you can better manage your crime insurance policy and protect your business more profoundly.
What Does A Crime Policy Not Cover?
Similar to many other insurance policies, crime coverage has exclusions. For example, crime insurance doesn’t cover the following claims:
Remember that crime-related losses can occur with other threats, so it’s vital to know the gaps your insurance policies might create. Lastly, lawsuits routinely involve claims not covered by non-crime policies, thus launching the idea of “silent crime,” where some crime-related incidents aren’t explicitly covered or excluded in traditional insurance policies. It’s worth exploring these gaps with a trusted commercial insurance broker to ensure adequate coverage.
Crime Insurance Cost
As with most commercial insurance policies, the cost of crime insurance depends on several factors. Following are some of the main points insurance carriers will consider when calculating your premium.
Crime Insurance Cost Factors
How much cash, securities, and inventory do you handle, and what is its maximum potential value for loss?
What type of internal controls, accounting practices, and dual authorization processes do you have in place already?
A bank or financial institution is more likely to be attacked than a small consulting firm with limited cash on hand.
The total number of employees and their access to company funds or sensitive data impacts the risk of internal dishonesty. Underwriters will recognize the increased risk associated with high-turnover roles or positions with sole control over financial transfers.
This is the primary factor for determining the rate change on renewal.
Crime Insurance Claim Examples
Crime can manifest in many different forms, from internal employee theft to external sophisticated fraud schemes. To illustrate how a commercial crime policy responds to these varied threats, the following examples demonstrate real-world scenarios where businesses faced significant financial loss and relied on their crime insurance to cover investigative costs, defense fees, and the direct loss of money or securities.
A non-profit organization, GiveBig, discovered that its longtime chief financial officer had been systematically funneling money to a shell company they owned over a period of three years. The CFO used a complex scheme of false invoices and unauthorized transfers to steal over $800,000. GiveBig’s crime policy covered the direct financial loss, plus the cost of the forensic audit required to uncover the full extent of the scheme.
A US-based technology company, InnovateNow, received an email, seemingly from the CEO, instructing the accounting department to wire $500,000 immediately to an overseas supplier for an emergency purchase. The email was a deep-fake social engineering attack. The accounting manager complied, and the funds were lost to the criminal. The crime policy’s Funds Transfer Fraud coverage is expected to pay the $500,000 loss.
A former employee of a regional manufacturing firm, MetalWorks, stole a pad of company checks before being terminated. Over the next month, the former employee forged the CEO’s signature on several checks, cashing them for a total of approximately $75,000. MetalWorks incurred extensive costs to prove the forgery and restore the stolen funds. The crime policy paid the financial loss and investigation costs.
A SaaS platform, CodeCrafters, was targeted by an external hacker who gained remote access to an internal accounting computer through a sophisticated phishing attack. The hacker then initiated two wire transfers totaling $250,000 to an offshore account before being detected. The organization settled with the bank and is now compelled to revamp its security policies and implement technical safeguards.
A non-profit organization, GiveBig, discovered that its longtime chief financial officer had been systematically funneling money to a shell company they owned over a period of three years. The CFO used a complex scheme of false invoices and unauthorized transfers to steal over $800,000. GiveBig’s crime policy covered the direct financial loss, plus the cost of the forensic audit required to uncover the full extent of the scheme.
A US-based technology company, InnovateNow, received an email, seemingly from the CEO, instructing the accounting department to wire $500,000 immediately to an overseas supplier for an emergency purchase. The email was a deep-fake social engineering attack. The accounting manager complied, and the funds were lost to the criminal. The crime policy’s Funds Transfer Fraud coverage is expected to pay the $500,000 loss.
A former employee of a regional manufacturing firm, MetalWorks, stole a pad of company checks before being terminated. Over the next month, the former employee forged the CEO’s signature on several checks, cashing them for a total of approximately $75,000. MetalWorks incurred extensive costs to prove the forgery and restore the stolen funds. The crime policy paid the financial loss and investigation costs.
A SaaS platform, CodeCrafters, was targeted by an external hacker who gained remote access to an internal accounting computer through a sophisticated phishing attack. The hacker then initiated two wire transfers totaling $250,000 to an offshore account before being detected. The organization settled with the bank and is now compelled to revamp its security policies and implement technical safeguards.
Speak with a Crime Insurance Broker
Founder Shield is a data-driven insurance brokerage serving high-growth, innovative industries. We have a passion for creating and developing innovative risk management products across emerging industries and work hand in hand with clients and underwriters to ensure transparency, efficiency, and reliability every step of the way. Our team has specialized expertise and experience in providing crime insurance services.
We partner with the leading crime insurance carriers to craft tailored risk management programs for public companies and venture-backed companies preparing for funding rounds. With insurance a major budget item, we understand that companies look for new and creative solutions to help manage increasing costs while also securing best-in-class coverage.
Crime Insurance FAQs
What Am I Actually Getting For the Price of Business Insurance?
All quotes presented will provide coverage for a policy period of one year (unless specified otherwise). The quoted price represents the total cost for the...
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What If Our Company Grows A Lot or Things Change During the Year?
We've purposely built strategic relationships with insurance carriers that offer the most scalable coverage solutions on the market. This careful carrier selection is particularly crucial...
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How Do I Bind Coverage?
Getting started with your coverage is simple and streamlined! All you need to do is review and approve your customized proposal, select your preferred payment...
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How Do You Decide Which Carriers to Approach?
We approach carriers based on several carefully considered criteria, with carrier appetite being our primary consideration. Our experienced policy placement team maintains deep knowledge of...
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How Do I Get a Certificates of Insurance?
A certificate of insurance ("COI") is a standardized, one-page document that serves as formal proof of your insurance coverage. (Note: Getting a COI is as...
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How Do We Purchase “A La Carte” Commercial Insurance?
Our insurance packages are thoughtfully designed to complement the risk profiles of startups at various stages of their funding and life cycle, but we understand...
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