Every business, at some point, will deal with a form of crime that results in financial loss. Unfortunately, there is no way for companies to predict future crimes or even prevent them all. Business crimes can occur in any business, including offices, restaurants, retail shops and even warehouses.
No business is safe from all criminal activity, no matter how many CCTV cameras or how honest most employees are. Business crime typically includes theft, fraud, cybercrimes and more. In fact, there was a 50 % increase in Hong Kong’s crime rate in the first quarter of 2023, mainly fraud-related crime.
These unforeseen criminal acts can be due to third parties or employees themself. Business founders must recognise the crime risks to their company and have a strategy to deal with the outcome.
The best strategy that is recommended to most business leaders is crime insurance. The article will explain what is crime insurance and the great coverage of common business crimes worldwide.
What Is Crime Insurance?
Crime insurance covers the loss of money or other assets resulting from criminal activities by employees or third parties. Each industry has crime risks, and insurers can customise the insurance coverage to cover specific crimes.
Crime insurance is the best strategy to deal with sudden damaging business-related crimes on the company. The insurance will help policyholders recover from the financial loss, whether it was due to an employee or a third party.
The insurance covers loss due to theft, fraud, forgery and cybercrime. Business founders and management should understand these crimes, including the different variations.
What Does Crime Insurance Cover?
Employee Theft
Most employers trust their employees with company secrets, sensitive data and account management. Employee duties vary, depending on their role and the business industry. Employers hope each employee is honest when performing their duty; however, this is not always the case.
There are always situations where an employee or group of employees may steal from the company. The theft could be done by stealing physical cash, products or forging accounting details. Employee forgery and theft can take time to notice as it may be a constant slow process of stealing.
A study showed that 95% of employers have faced some form of employee theft. For example, an accounting manager may be forging the monthly number to seem lower and pocketing the difference. Over time, employee theft can result in substantial financial loss.
Such cases are devastating for the company and ruin trust in employees. Fortunately, crime insurance will cover the financial loss due to dishonest employees. The insurance will cover the loss, even if the crime has been occurring over a long time (before the policy) and the firm only discovered it during the policy period. However, the insurance will not cover financial loss due to accounting errors.
Third-Party Fraud & Forgery
Third-party fraud and forgery are crimes done by an unknown person or group where they alter information and take part in dishonest acts for financial advantage. Such third-party frauds include account takeover fraud, credit card fraud, identity fraud or even counterfeit currency.
According to the 2022 PwC’s Global Economic Crime and Fraud Survey – 51% of surveyed businesses have experienced fraud in the past two years (highest in 20 years). Fraud and forgery can result in severe losses.
For example, a third-party criminal may steal a business’s identity and credit card details to make large purchases or transfer money into personal accounts. Firms may sell products accidently to disguised criminals who have paid with forged bank checks or fraud cards.
Businesses must be aware of possible fraud and follow steps for identifying third-party fraud. Crime insurance will help businesses when they have been affected by third-party fraud. The insurance will cover the financial loss due to fraud or forgery. It is important to understand the different types of fraud and ensure they are covered.
On-Premises Theft
Each business premises contains different assets, cash and fixtures. Some premises store large amounts of money in cash registers or safes, and some have many electronic assets and products.
There is a chance companies may face break-ins, shoplifting and robberies. No matter the area’s safety or security, there is always a risk. Criminals may find a way to sneak past security and steal as much cash or products as possible or even damage assets.
For example, in 2022, 4 armed robbers stole watches worth HKD 10 million from a retail shop in the afternoon. On-premises theft can cause a huge amount of financial loss without insurance.
Crime insurance will cover the financial loss due to the crime to help recover. However, some crime insurance policies may not cover the cost of damage to business equipment or fixtures. It is always better to also have property all-risk insurance to cover damage to equipment, fixtures and other assets.
In-Transit Theft
Some businesses are at risk from in-transit theft above their premises theft risks. In-transit theft is when cash, product or another asset is stolen while moving from one location to another. The risk is higher for companies that deal with art, jewellery or high-amount cash deals.
The in-transit heist could happen while being delivered by a service provider or even an armoured van. Third-party criminals or even employees can plan such crimes and may include violence against the managing employee(s).
Companies should keep the movement of assets and must take professional steps. Although in-transit thefts are unpredictable, thankfully, it is covered by crime insurance. The insurance will cover the cost and value lost during the in-transit crime.
Computer Fraud
Cybercrime is one of the most dangerous and recent crimes businesses must worry about. Computer fraud is a cybercrime where cyber criminals find ways to infiltrate a company’s servers and steal through fund transfers.
Cybercrime can be done by third-party cybercriminals or employees. Computer fraud is more money-related than data and focuses on transferring funds electronically from the company’s account to another malicious account. The hackers gain access to the company network by manipulating and tricking employees through social engineering attacks.
Crime insurance will cover computer fraud, but there is a complex line on how much will be covered. The insurance will only reimburse the direct loss of funds due to the unauthorised transfer. The insurance will not cover data loss, ransomware funds or many cyber-attack-related costs. Companies need cyber insurance to cover all expenses related to cyber-attacks.
Does Your Business Need Crime Insurance?
Every business needs crime insurance as there is always a risk they will be affected by at least one of the above crimes. The insurance can benefit most industries and save them from massive financial loss.
Crime can occur everywhere around the world, especially with cybercrimes growing. No country or city is entirely safe, and not all employees are honest. However, business owners should communicate clearly with the insurance provider about all their risks to get the best coverage.
Financial protection and peace of mind are something every business gains when they have crime insurance. The policy can provide the perfect safety net when faced with crime to recover and improve to avoid future crimes.
To Learn More about crime insurance and protect your business from criminal activities in Hong Kong & Asia, contact Red Asia Insurance.
