Headline:  What is Crime Insurance?

Body:  Crime insurance?   Did I read that right?   Yes, dear reader, you did.  I bet it sounds to you, almost as stupid as “pet health insurance” did to me at one point.  But, then our friends’ golden retriever developed cancer, and we saw the bill for just one visit to the doggie oncologist.   It all snapped into focus then.  In a similar way, business crime insurance can mitigate damage done or perhaps save your entire enterprise.

OK, so what IS Business Crime Insurance

Business Crime Insurance (BCI) helps protect your enterprise from people physically damaging your business or taking of physical inventory.  So, why am I writing about this?  BCI can also cover you for damages related to ransomware attacks and other virtual threats.  I can see it now, even a TV show, like CSI Miami

Lab Guy: Ransomware really bytes.

Horatio: (dramatically whipping off sunglasses)  Just a bit.

Theme song and intro.

What do you think?

Is this really a big deal?

Well, yeah, it is.   Per a study by the Association of Certified Fraud Examiners (ACFE), businesses worldwide lose about 5% of their revenue to fraud.  This picture gets even worse when you consider that small businesses suffer the most: Each case costs these small businesses $150,000.  This can severely damage some companies and  sink other small businesses entirely.  A different study, executed by a surety company said that the average victim company took more than 2 years to discover the theft.  This is a substantial period of time, and the company could have executed a good investment in the meantime, earning dividends and income. 

When it comes to crime, is there a difference between computer crime and cyber crime?

Yes, at least in the view of insurance companies, computer crime differs from cybercrime. Cybercrime always has something to do with a virtual intrusion completely executed by a party on the outside.  An example would be a third party using a worm to get into a competitor’s system.  Computer crime is often due to a lack of due care by employees.    An example is an employee opening  an unknown e-mail and launching an attachment, thinking it’s something benign.

Are there different flavors of BCI, or are they all vanilla?

There is one very important distinction to make: The insurance can be on a discovery or loss sustained basis.    Discovery-type insurance is effective when a loss is discovered and reported within the insured term, regardless of when the loss happened.   Loss Sustained insurance requires the loss and discovery to BOTH occur within the insured period.

Beyond BCI, there are fidelity bonds, and they come in 3 varietals.  There are Employee dishonesty bonds, ERISA bonds and Business service Bonds.  Employee dishonesty bonds cover a business for theft, fraud and forgery.  ERISA bonds are required to protect an employer’s retirement program from fraud.  Business service bonds cover an employer if the employee engages in theft on a client’s premises. 

So, besides paying for insurance, what can be done?

A consultancy, Media Post, opines that cyber crime, in particular, is increasing.  Often, training is your most effective insurance policy, and most of this training is considered “cyber common sense.”  One thing is to remind employees to NOT open any e-mail that they don’t  recognize the sender.  Further, never open executable files that come along with e-mails.  Commonsense can go a long way to keeping your corporate assets safe.

The Verdict

This can be tricky, figuring out what policies cover what activities.     I guess the boilout is to take some commonsense steps.

1. Take a really good look at your enterprise and determine where you are likely to be weak
2. Take out appropriate insurance policies to address these weaknesses.
3. Provide a robust training program to all employees, emphasizing the safe use of corporate IT assets.

This will go a long way to keeping your enterprise safe, and should impress your insurance company, who might lower your rates? No, not likely, but it’s worth a shot.

REFERENCES

Business Crime Insurance: What it is, How it Works, Impact (investopedia.com)

What Is Business Crime Insurance? | U.S. News (usnews.com)

5 Types of Crime Insurance Policies Businesses Should Consid (insuranceopedia.com)

Computer Crime Insurance: What It is, How it Works (investopedia.com) Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the