The Ultimate Guide to Understanding Crime Insurance

Every business will eventually experience a form of crime that results in financial loss. Unfortunately, companies cannot predict future crimes or prevent all of them. Business crimes can occur in any business, including offices, restaurants, retail shops, and 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. Hong Kong’s crime rate increased by 50% in the first quarter of 2023, mainly due to fraud-related crime.

These unforeseen criminal acts can be committed by third parties or employees themselves. Business founders must recognise the risks to their company and have a strategy for dealing with the outcome.

Most business leaders recommend crime insurance as the best strategy. This article will explain crime insurance and its ideal 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 for dealing with sudden, damaging business-related crimes. It helps policyholders recover from financial losses caused by an employee or a third party.

Insurance covers losses due to theft, fraud, forgery, and cybercrime. Business founders and management should understand these crimes, including their various 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 duties; however, this is not always the case.

There are always situations where an employee or group of employees steal from the company. The theft could involve physical cash or products, or forging accounting details. Employee forgery and theft can take time to notice, as they may be slow.

A study showed that 95% of employers have faced some form of employee theft. For example, an accounting manager may be forging the monthly numbers 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 financial loss due to dishonest employees. The insurance will cover the loss even if the crime occurred for 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 committed by an unknown person or group that alter information and engage in dishonest acts for financial advantage. Examples of third-party fraud include account takeover fraud, credit card fraud, identity fraud, and counterfeit currency.

According to the 2022 PwC Global Economic Crime and Fraud Survey, 51% of surveyed businesses have experienced fraud in the past two years (the highest percentage 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 fraudulent cards.

Businesses must be aware of possible fraud and follow steps to identify third-party fraud. Crime insurance will help businesses when they are affected by third-party fraud. The insurance will cover the financial loss due to fraud or forgery. It is essential to understand the different types of fraud and ensure they are covered.

On-Premises Theft

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 the afternoon of 2022, four armed robbers stole watches worth HKD 10 million from a retail shop. Without insurance, on-premises theft can cause a substantial financial loss.

Crime insurance will help recover from financial losses caused by crimes. However, some policies may not cover the cost of damage to business equipment or fixtures. It is always better to 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-value cash deals.

The in-transit heist could occur while being delivered by a service provider or even an armoured van. Third-party criminals or even employees can plan such crimes, which 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, they are 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 in which cybercriminals find ways to infiltrate a company’s servers and steal funds through transfers.

Third-party cybercriminals or employees can commit cybercrime. Computer fraud is more money-related than data-related and focuses on electronically transferring funds from the company’s account to another malicious account. 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 cyberattacks.

Does Your Business Need Crime Insurance?

Every business needs crime insurance, as there is always a risk that it will be affected by at least one of the above crimes. The insurance can benefit most industries and save them from massive financial loss.

 No country or city is entirely safe, and not all employees are honest. However, business owners should communicate clearly with their insurance provider about all their risks to get the best coverage.

With crime insurance, every business gains financial protection and peace of mind. The policy can provide the perfect safety net for recovering from a crime and helping avoid future crimes.

Various forms of business crime can occur worldwide, making crime insurance essential for safeguarding companies.

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To Learn More about crime insurance and protect your business from criminal activities in Hong Kong & Asia, contact Red Asia Insurance.