Crime coverage insurance in Canada

Crime vs. cyber vs. property insurance

When a financial loss occurs, the type of insurance that responds will depend on how the loss happened. Crime insurance, cyber insurance and commercial property insurance each address different triggers, even when the outcome looks similar.

Crime insurance

Crime insurance generally applies when money or other property is taken through theft or fraud. The loss usually involves a dishonest or fraudulent act. This may include situations where funds are stolen, misdirected or obtained through deception. The focus is on the loss of the money or property itself.

Cyber insurance

Cyber insurance generally applies when a loss results from a failure of network security. This type of policy is tied to incidents involving unauthorized access to systems or data. Coverage often relates to response costs and recovery expenses following a cyber incident. Whether fraud-related losses are included depends on the wording of the policy.

Property insurance

Commercial property insurance generally applies when physical property is damaged or stolen. This coverage is tied to buildings and their contents and it’s typically triggered by events that cause physical loss or damage. Property insurance does not usually apply to money lost through fraud or electronic transfers.

What about social engineering losses?

Social engineering losses do not always fit neatly into one policy. In these situations, a business sends money based on fraudulent instructions that appear legitimate but are not.

Example:

A business receives an email that appears to come from a known vendor. The message advises that the vendor’s banking information has changed. The email asks that future payments be sent to a new account.

Because the:

• Request looks legitimate,

• Contact name is familiar and

• Timing doesn’t raise concerns

The change is processed using the business’s usual payment process.

Later, a scheduled payment is sent to the new account. Several days pass before the real vendor follows up with the business about a missing payment. At that point, the funds can no longer be recovered.

In this scenario, there was no physical damage and the computer system itself was not compromised. Instead, the loss occurred because the business acted on false instructions that appeared genuine.

Because of this, coverage will depend on the wording of the business’s insurance policy in place, as some crime policies require a specific social engineering endorsement, while some cyber policies may respond in limited situations. Without the appropriate wording, these losses may not be covered at all.

How to file a crime insurance claim

If a crime-related loss occurs, you can file a claim under your crime insurance policy to help recover the loss.

1. Stop further loss

If you believe a theft or fraud has occurred, the first step is to prevent the situation from getting worse. This may involve freezing your affected bank accounts or disabling your compromised credentials.

2. Gather information

After taking steps to stop further loss, gather any documents or records related to the incident, such as emails, invoices, approvals, bank statements and transaction records, so that you can report the loss to the right authorities.

3. Report the incident

Once immediate steps are taken to stop further loss and gather available information, the incident should be reported to the appropriate authorities.

The Competition Bureau of Canada explains that, depending on the circumstances, reporting may include:

• Your local law enforcement

• The Canadian Anti-Fraud Centre or the Competition Bureau

• The financial institution that was involved

• The website or platform where the fraud occurred (if applicable)

For crime insurance claims, insurers often require a police report as part of the review process, so it’s a good idea to keep track of any calls you make and the police file number if they give you one.

4. Contact your broker

Crime insurance policies often require prompt notice once a loss is discovered, so it’s best to contact your insurance broker as soon as you become aware of the incident. They can help you start the claims process, guide you through the rest of it and answer any questions you have.

5. Reviewing how the loss occurred

Once your claim has been submitted, your insurer will review how the loss occurred to help them determine which coverage may apply. This may include examining bank records, payment instructions, internal approvals and related communications. You may also be asked to explain what controls were in place and how the transaction was processed.

6. Assessing the financial loss

Once the facts are established, the amount of the loss will be reviewed. This may involve confirming transferred amounts, unrecovered funds and any applicable deductibles or limits under the policy. Generally, at this stage, only direct financial losses covered by the policy will be considered.

7. Claim settlement

If the claim is approved, your insurer will issue payment according to the terms of the policy. How long this process may take will depend on the complexity of the loss and how quickly any required information is provided.