Commercial Crime Insurance


What is it for


It's hard to realize that your employees may be committing illegal acts against your company. The unfortunate truth is that the fraudsters may be employees you trust the most, as well as senior management who know how to bypass security and organize a hidden, well-disguised fraud scheme.

If they succeed, the scheme can run for years. It can involve not only employees but also third parties such as suppliers. Fortunately, only a small percentage of employees are willing to commit illegal acts, but there are many reasons why they do so. These include financial difficulties, impending retirement or resentment towards management. Various forms of addiction can also be a very common reason.

These crimes can result in significant financial damages, including loss of money, securities, inventory, and damage to the company’s reputation.

Commercial Crime Insurance is designed to mitigate these risks by providing coverage for the losses incurred as a result of criminal activities. It helps businesses recover financially and protects their assets from the impact of such crimes.

What is commercial crime insurance?

Commercial crime insurance, also referred to as fidelity insurance, financially protects your business from criminal acts committed by employees against customers or clients.

If one of your employees (or anyone else working on your behalf) steals from a customer or client, crime insurance provides them with reimbursement.

Commercial crime insurance pays for any losses following employee fidelity and third-party fraud.

Important coverage areas to consider are as follows:

  • fraud committed prior to the inception of cover, but discovered during the policy term
  • theft of pension scheme assets
  • broad definition of employee
  • no warranted system of control
  • payment of auditors fees to substantiate any claim

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, cybercrime 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.

Top 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 Cover?

Commercial Crime Insurance policies typically offer coverage for the following types of crimes:

  • Employee Theft: coverage for losses resulting from theft committed by employees
  • Forgery or Alteration: coverage for losses resulting from forgery or alteration of checks, drafts, or other financial instruments
  • Computer Fraud: coverage for losses resulting from unauthorized access to computer systems or fraudulent electronic funds transfers
  • Money and Securities: coverage for losses resulting from theft, disappearance, or destruction of money and securities
  • Extortion: coverage for losses resulting from threats of harm or damage to the insured business
  • Robbery or Burglary: coverage for losses resulting from theft or damage to property due to robbery or burglary
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:

  • Crimes by business owners or top management (a policy insures your business only against employee theft or fraud. This does not include business owners or senior management)
  • Noncriminal mistakes and oversights (professional liability insurance covers the costs of lawsuits over mistakes or oversights and professional negligence)
  • Indirect loss (as imagined, indirect loss or loss that can’t be traced back to a specific crime isn’t covered either)
  • Indirect financial losses (such as business interruption, loss of income, or legal expenses)
  • Employees with criminal records known to employers (if you hire an employee with a known criminal record and they commit fraud or theft)
  • Data breaches (if a data breach occurs at your business by an employee, commercial crime insurance would not provide coverage for related expenses, such as customer notifications. You should get cyber insurance for this protection)
  • Exposures covered by other policies

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Benefits of Commercial Crime Insurance

Commercial Crime Insurance provides several benefits to businesses, including:

  • Financial Protection: It helps businesses recover financially from the losses incurred due to criminal activities
  • Asset Protection: It protects the company’s assets, including money, securities, and inventory, from theft and other criminal acts
  • Reputation Protection: It helps businesses maintain their reputation by covering losses resulting from fraud or other criminal activities that could damage their image
  • Peace of Mind: It gives business owners peace of mind, knowing that they are financially protected against potential criminal risks

Commercial Crime Insurance is an essential coverage for businesses of all sizes and industries, as it helps mitigate the financial risks associated with criminal activities. It is important for businesses to carefully assess their exposure to such risks and obtain adequate coverage to protect their financial well-being.