Crime Insurance

What Does Crime Insurance Cost?

Costs for crime insurance depend on how the policies are written (bundled or stand-alone), how many endorsements, or options, are included, as well as industry and business size. To evaluate risks and provide rates for crime insurance, underwriters will take many factors into consideration, including:

• Current assets of business.
• Gross sales/income.
• Type of business and its primary activity.
• Total number of locations/premises for the business.
• Total number of employees.
• Percentage of employees with access to records of money, securities or other property.
• Procedures and policies the business has in place to prevent employee-related crime.
• Procedures and policies regarding vendor and inventory controls.

What are Common Crime Claims?

According to the FBI crime report there were almost eight million property crime offenses in 2016 in the United States. Larceny-theft accounted for over 70 percent of property crimes, burglary accounted for nearly 20 percent and motor vehicle theft for almost 10 percent. Losses were estimated at over $15.5 billion in 2016. Over 700,000 businesses reported burglaries in 2016.

In the most recent market report written by Arthur J. Gallagher & Co., the most frequent business crime claims involve some type of employee scheme. These schemes usually involve bogus vendors and/or invoices. The employee will invent, or collude with, a vendor, then invent invoices for this vendor from which he/she then pockets the payments. This scenario is also used commonly to take advantage of foreign operations.

When it comes to fraud, The Association of Certified Fraud Examiners, Inc. (ACFE), reports an average loss of $2.7 million per case in 2016. Asset misappropriation is by far the most common form of occupational fraud, or fraud committed in the workplace, occurring in more than 83 percent of cases. Other common claims with high loss statistics stem from financial statement fraud and corruption.

How Can I Reduce my Risk?

Reducing risk of employee theft and other crimes covered by crime insurance is a matter of identifying exposures and creating procedures and policies to prevent and stop employee crime. Working with knowledgeable and expert specialists in crime insurance will help you identify all areas of crime risk in your organization. After which, there are a number of steps you can take to help prevent and stop both employee-related and third-party crimes.

According to The Association of Certified Fraud Examiners, Inc. (ACFE), tips were the number one fraud detection method in 2016. Depending on your amount of risk, setting up procedures and safe ways employees can submit tips will increase reporting and help stop crimes in progress. To even further this rate of reporting, some companies set up tip hotlines for the express purpose of providing a safe and anonymous place for employee reporting (email and website reporting methods are also great methods). This is a type of active detention, which, when used, has proven to shorten the length of fraud schemes by up to half. ACFE reports that the average fraud scheme lasted about 18 months in 2016.

Crimes against businesses are usually crimes of opportunity. Reducing those opportunities and establishing some checks and balances between departments will be critical to risk management in this area.

Some ways you can actively prevent fraud against your business include:

• Establishing procedures and policies that outline guidelines for employee theft, employee substance abuse, crime reporting, opening and closing the business and other security procedures.
• Establishing rigorous hiring and vendor relationship practices, including background checks and Better Business Bureau (BBB) checks.
• Establishing policies for all other exposures for employee theft, such as for inventory, office supplies and computers.
• Establishing security, both physically such as in using alarms and safes, and through policy such as in limiting access to vulnerable information.

To get more security and prevention tips for non-employee-related crimes, contact your local law enforcement agency. The police are often more than willing to help assess crime vulnerability as this helps them do their job and prevents unnecessary allocation of their resources for preventable crimes.

Frequently Asked Questions

1. What is excluded in crime insurance?

Typically excluded in all crime insurance policies are dishonest acts committed by business owners, directors and officers of a board or business partners. Many policies also exclude accounting errors and certain types of legal fraud. It is important to understand what your policy includes and excludes. The Insurance Shop will always make sure you understand your coverage.

2. Are small businesses (500 employees or less) victimized as much as larger companies?

Small businesses are, in fact, more often victimized than larger businesses. Smaller businesses tend to have less security and/or policies and procedures in place to help detect and prevent employee-related crimes. All business that deal with cash, checks, online payment systems and credit cards are vulnerable to crime and must insure themselves.