What is crime insurance?
Crime insurance, also known as fidelity insurance, protects businesses against money, property, stocks or securities being stolen by either employees or third-parties. In addition, if your business is legally responsible for clients’ money or property, crime insurance can also help to support these type of losses.
Crime coverage can be included within your property policy. However, some businesses may require a stand-alone crime policy due to the nature of your operations or if there is an increased risk of crime claims in your industry. Talk to your broker to ensure you have the coverage that matches the needs of your business.
Why does a business need crime insurance?
Large or small, your business can be a target of crime at any time. From fraud and employee theft to forgery, crime insurance will step in to help you recoup these losses and help your business recover. Fraud can go undetected for years, while quickly racking up a hefty financial loss by the time it’s discovered. A criminal can deceive even your most diligent employees.
In addition, crime insurance can help cover the costs associated with the crime itself, including the investigation process, repairing financial records and the restoration of data.
Here’s an example of a common social engineering scam:
A controller at a car dealership received an email from the owner requesting a wire transfer that day. The owner’s email address and email signature appeared to be authentic. The controller set it up and asked for the details of the transfer. Eight days later, the same request to transfer additional money came through. The controller believed the entire time that they were dealing with the owner. The scam was timed for when the owner was away on holidays. The total loss was over $50,000, plus the time and staff resources required to recover from the crime.
Crime costs. While it helps to have preventative measures in place, criminals are crafty and are finding smarter ways to sabotage your business. Crime insurance coverage is there to help your business should crime strike when you least expect it.
What is typically covered under crime insurance?
Your crime policy can include many types of coverages. It is best to review your policy and the coverage included with your broker. The following are some of the key coverages that might be included within your crime policy.
- Employee theft coverage - this covers loss of money, securities and other property unlawfully taken by employees.
- Premises coverage - this covers a loss due to disappearance or destruction of money and securities from your premises by a third party.
- Forgery or alteration coverage - this covers loss due to the forgery or alteration of cheques, drafts, or other financial instruments
- Computer fraud coverage - this covers a hack to your system by a third party which gives them control of your computer(s), resulting in money or property being fraudulently transferred to a place or account that you do not own.
- Money Orders and Counterfeit Currency Coverage - this covers a loss due to the acceptance of a money order or counterfeit currency.
- Telephone fraud coverage - this covers the cost of fraudulent phone charges.
- Social engineering fraud coverage* - this covers the loss when a third party impersonates a client, vendor or an employee, in order to trick you to send money to them, similar to the example above with the car dealership controller.
- Funds transfer fraud coverage* - this covers the loss when a third party gains access to your banking credentials (username, password) and can access your banking website to instruct the banking institution to send money from your account to the fraudsters account.
*Social engineering fraud and funds transfer fraud also could be covered under a cybercrime policy.
The difference between a crime policy and a cybercrime policy
The cyber landscape is ever changing and cyber criminals are using advanced technologies to deceive their victims. Therefore, many businesses have cybercrime policies leading to a growing confusion between a crime policy and cybercrime policy.
Basically, a crime policy covers the direct loss of funds due to theft of physical property, employee dishonesty, or social engineering. You can think of it as “old school crime.”
A cybercrime policy covers economic damages from a network security failure, like phishing scams, email and internet fraud, identity fraud, and cyberextortion.
Top 10 crime prevention tips
Business fraud and scams cost Canadian corporations millions of dollars each year. It’s important to implement crime prevention strategies to manage risk your business faces. We’ve listed some tips below to help you get started.
- Conduct regular crime awareness and prevention training with your employees
- Share what cybercrime attacks like phishing and social engineering could look like.
- Create a procedure manual for employees, highlighting how to deal with crime.
- Establish strong workplace communication to help employees spot and report criminal activity.
- Maintain a strong workplace culture. A strong and supportive workplace culture has no room for employee theft, fraud or other internal criminal activity.
- Run security checks on all staff, which may include asking them to submit a criminal reference check.
- Review and improve your inventory control system continuously, to ensure you have tight procedures in place that will help you notice if product mysteriously vanishes.
- Install effective lighting, security systems and signage.
- Ensure your property is well lit, including back alleys, exteriors, hidden entrances, and parking lots.
- Video surveillance is relatively affordable and easy to install and purchasing a security system that is appropriate for your business size can help you keep a watchful eye, especially when you’re not there.
- Install signs to warn and deter people, such as “Smile you’re on camera” or “Protected by video surveillance” stickers.
- Initiate a whistleblower program or hotline. This can help avoid significant financial losses due to employee fraud.
- Require multiple sign-offs for wire transfers and other financial transactions, to limit the potential for fraudulent acts.
- Double check the numbers. Audit all financial and accounting functions routinely, to ensure quick detection of fraudulent activity. Smaller businesses may put their trust in a self-taught bookkeeper. Have their work reviewed by a professional to keep them honest.
- Reinforce entry points and regularly inspect locks, deadbolts, and exterior and interior doors, windows, and skylights. Replace or repair immediately. Install burglar resistant glass, hardware, security grates, bollards, and panic buttons.
- Have a plan to handle cash.
- Train employees to carefully examine all bills of $10 or higher to detect counterfeit money.
- Keep onsite cash limits to a minimum.
- Excess cash should be stored in a properly rated safe and listed (UL/ULC) safe for your operations. Ensure all safes are bolted to the floor.
- Remove cash from tills nightly.
- Vary your bank deposit routine. Take a different route to the bank each time and schedule your trips during business hours. Avoid making large deposits, instead visit the bank frequently with smaller amounts.
Crime insurance from BrokerLink
You put a lot of work and passion into your business. Crime is demoralizing and invasive, and can set any business back. BrokerLink insurance advisors are here to help you navigate insurance and risk, so you can focus on running a successful business. Get in touch to review your insurance policy and to discuss crime coverage options that fit your needs.
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Crime insurance FAQs
What is not covered by crime insurance?
A crime insurance policy is void if the policy holder commits a crime. Crime insurance only covers crimes by employees and third-party vendors. In addition, non-material losses caused by external incidents like war, are generally not covered. Each crime insurance policy is tailored to the business’ needs. Talk to your insurance advisor to understand what is covered by your crime insurance policy.
What are the factors that determine whether my business is eligible for crime insurance?
Unfortunately, all businesses are susceptible to crime. Therefore, any business is eligible to purchase crime insurance coverage. Talk to your insurance advisor to learn more about your options.
How can I claim my crime insurance?
Should a crime event happen to your business, first call the police. Then call your insurance broker to start the claims process. As your insurance advisor, they have the expertise to guide you through your claims process and are there to answer any questions you have.
