Key takeaways
- Crime insurance offers financial protection from a criminal or fraudulent taking, obtaining or appropriation of money, securities or property
- There are different types of crime insurance available ranging from employee fraud or fidelity insurance, third-party fraud, client fraud, and social engineering
- Crime insurance should be used in conjunction with good risk management and internal controls - which are commonly a prerequiste to obtaining cover
What is crime insurance?
Types of crime insurance cover
Employee fraud or fidelity insurance
Employee fraud insurance (also known as fidelity guarantee) provides protection for financial loss, caused by an employee's criminal or fraudulent behaviour.
Third-party fraud insurance
Third party fraud coverage provides protection for financial loss caused by a third party's criminal or fraudulent behaviour.
Client fraud insurance
Client fraud coverage provides protection against for financial loss, to the deprivation of a client, caused by an employee's criminal or fraudulent behaviour.
Social engineering fraud insurance
Social engineering fraud provides protection against financial loss, caused by an act of influencing an employee to divulge sensitive information or perform a task on the fraudster's behalf.
Why is crime insurance important?
Companies with inadequate controls are often the target of sophisticated criminal networks and disgruntled employees. Crime insurance can offer valuable protection against an increasing threat of criminal activity. Theft of money and property costs UK businesses hundreds of millions of pounds every year. Crime cover can offer financial protection to guard against the financial loss and forensic costs to investigate what happened.
- UK GOV website - cyber security breaches survey 2024
- Cifas research - 3 in 5 surveyed believe fraud is a significant concern
- Financial Ombudsman - fraud and scam complaints hit highest levels
Cyber insurance vs Crime insurance
Cyber crime can potentially be covered under both cyber insurance and crime insurance, however each policy seeks to mitigate the impact in different ways. Cyber insurance can also include 1st party cost and expenses - which can assist with incident responses, payment of ransom demand, and in some cases provide a sub-limit for funds transfer fraud and social engineering fraud.
Factors impacting your crime insurance costs
Below are key considerations when insurers calculate your insurance premium:
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The size and scope of an applicant's activities and territorial exposure measured by turnover, employee numbers and total assets will impact your insurance cost.
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The quality of controls to mitigate potential exposures, will also impact your insurance cost:
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Are employee duties segregated, so no one employee can control any transaction from start to finish?
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Do you maintain a dual authorisation procedure for transferring funds?
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When recruiting for positions of trust involving money or stock, do you undertake background checks?
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Frequency and severity of claims, in addition to any remedial action for any historic losses will impact the availability of crime cover.
Losses discovered basis
It's important that if you discover a crime has occurred during the policy period, you notify the insurer of those circumstances as soon as reasonably practicable.
How we can help?
It's important to work with a specialist crime insurance broker that have access to Lloyds of London syndicates and MGA's. We can ask the right questions to ensure we present your risk profile in the best possible light. For tailored commercial crime insurance solutions, contact our team for advice today. Talk to one of speciast brokers about your requirements by requesting a call-back.
Written by Simon Taylor
Simon Taylor is a respected senior industry professional and a Chartered Insurance Broker with over 20 years’ of experience in the commercial insurance sector as an underwriter, broker and director.