Need for Crime Insurance
- Both personal and commercial insurance are targets for criminals.
- Little chance of recovery creates need for additional coverage.
History of Crime Insurance
- Has existed throughout the history of the insurance business.
- Continued to evolve to meet needs of consumers.
Perils Inside, as Well as Out
In additional to perils from the outside, a business owner faces perils from inside the business (employee dishonesty, computer fraud, document forgery).
- May be insured under “Comprehensive Dishonesty, Disappearance, and Destruction policy - AKA, “3-D policy)
Conditions Unique to Crime Insurance
- There can be stipulations as to how to distribute any stolen property after the claim is settled.
- The value of the property under the policy tends to be the actual cash value at the time of the loss, unless the property has been
Conditions Unique to Crime Insurance
- There can be stipulations as to how to distribute any stolen property after the claim is settled.
- The value of the property under the policy tends to be the actual cash value at the time of the loss, unless the property has been used as a pledge or collateral (ex. used as a loan) in which case it may be worth the amount agreed at the time the loan was made.
- If securities are stole, then they are valued at their actual cash value at the close of business on the last business day before the discovery of the loss.
Exclusions Unique to Crime Insurance
- Damage to glass or damage to lettering, ornamentation, tapes, or foils on the glass.
- Loss or damage to manuscripts, records, or accounts, except for their blank values.
- Loss or damage due to any criminal act committed by the insured, his or her partner, or an officer, employee, director, trustee or insured’s authorized representative, whether acting alone or in collusion with others.
Common Types of Crime Insurance
- Church theft
- Damage to building by burglary or robbery
- Inside/outside robbery
- Money and securities
- Office/store burglary and robbery
- Stock burglary
Church Theft
Applies to religious, education or social auxiliary botanizations under the insured director of control for loss of money, securities, and property by theft and for damages to the premises and property caused by the actual or attempted theft.
Damage to Building by Burglary or Robbery
Damage to the premises caused by actual or attempted theft.
Includes vandalism, malicious mischief if occurring at the same time.
Excludes loss arising from a fire.
Inside/Outside Robbery
Actual or attempted robbery of a custodian on premises, and includes damage to the premises and theft from a window display while the premises are open.
AKA smash and grab coverage.
Money and Securities
Includes loss of money and securities by their actual destruction, disappearance, or unlawful removal within the premises, as well as the damage to the premises and property.
Also applied to losses inside the premises, and outside the premises while the money and securities are being conveyed by a custodian.
Exclusions
- Loss due to an accounting error or omission.
- Loss of money contained in vending machines, unless the deposits are recorded by a continuous recording instrument.
- Loss due to unauthorized electronic transfer.
- Potential income loss from interest or dividends.
Office/Store Burglary and Robbery
- Replaces older storekeepers and office burglary and robbery policies.
- Insured selects one of three combinations of coverage:
A four part OR a seven part package for office burglary and robbery OR a seventh part package for store burglary and robbery. - Combinations are drawn from the following coverages:
- Inside Robbery
- Outside Robbery
- Safe Burglary/Burglary of Money and Securities
- Kidnapping
- Theft of money and securities in night depository or custodians home
- Burglary of stock in store
- Theft from office premises
- Damage to property and premises
Stock Burglary
Applies to loss or damage to stock and equipment caused by a burglary or robbery of a watchman or by vandalism or malicious mischief committed on the same occasion.
Includes coverage for show cases that do not open directly onto the interior of the premises.
No coverage for furs, leather goods, or articles containing either when removed from a showcase or window display.
Moral Hazards
- Cover a broad spectrum of human behaviour.
Examples: business owner who does not keep safe locked as it is too hard to re-open, business owner who forgets to set alarm each day when leaving, business owner that neglects to make the bank deposits each evening.
Physical Hazards
- Protection provided (alarms, locks)
- How easily covered property is to carry off with
- How easily property would be to sell
Burglary Exposure
Certain business, such as fur and jewellery, are more susceptible to burglary than others.
Susceptibility determines the kind of protection needed.
Cash on Hand
Risks holding large amounts of cash on premise are targets for hold up and robbery.
Regular deposits.
Alarms
Safes
Vaults
Loss Ratio Kept Low
Made relatively expensive for insurers by the added cost of inspecting risks. Therefor loss ratio must be low to keep profitable.
Employee Dishonesty Coverage
- Theft from employees.
- Has been a concern since the early twentieth century.
- Some employers started requesting guarantees from employers handling large sums. Employee had to prove that the employee would be reimbursed if the employee ever acted dishonestly. Guarantee bonds. Fidelity bonds.
- Commonly purchased as part of the 3D policy.
3D Policy
Combination of employee dishonesty insurance and coverages related to other exposures such as moneys and securities.
- Blanket policy covering all employees.
Two Forms of Coverage
- Under the 3D policy, insurers against intentional fraudulent or dishonest acts committed by the employees.
- Covers direct loss, as well as all goods mentioned in the policy (stock, confidential info, software).
Offered in two ways:
A: applies when the amount of insurance is applied per occurrence independently of the number of the employees involved.
B: applies when the amount of insurance is applied per employee involved in the embezzlement. Typically only given for certain limits.
Employee
- Broad.
- Can include a multitude of people - contract employees, directors and officers (if they are actively employed by the company).
- Includes 30 days after an employees departure.
- Insured is excluded as it would be a criminal act.
Trigger for Loss
- The discovery of loss during the policy period.
- Creates two problems:
1. Some losses may occur over a period of time that continues after the policy has expired.
2. Some losses may occur during the policy period but be discovered after the policy has been cancelled or renewed by another carrier.
To deal with this, policy includes a discovery period that extends coverage under the policy to losses discovered within a specified period of time after the policy has expired. Policy A - one year, Policy B - two years.
