Know About Commercial Crime Insurance Coverage

What is Commercial Crime Insurance?

Indian businesses are largely susceptible to burglary, theft, forgery, and many other forms of fraud. These issues may cause a company to experience a financial disaster, from which it may recover at a great cost. Take, for example, the case of one of the largest food-tech startups, Swiggy. A news media reported that a Swiggy employee committed fraud of ₹33 crore to the company, which has cost the startup a legal dispute and financial damage. These kinds of damages may occur to any company and need robust protection before the company suffers the financial strain. Here comes the role of commercial crime insurance, which is designed to safeguard businesses from financial losses arising due to criminal activities committed by employees, third parties, or a combination of both.

Commercial Crime Insurance Meaning

Let’s break down the entire functionality of corporate crime insurance policy in simpler terms. In simple terms, commercial crime protection is a policy that covers a company's financial losses due to criminal activities like employee dishonesty, forgery, fraud, and theft. It provides a safety net for businesses, providing a strong financial backup for all expenses incurred during a theft, or a forgery.

Coverage Under Commercial Crime Insurance

Business crime insurance policies typically cover a wide range of criminal activities that can adversely affect a business. Some of the common coverages include:

Covers employee dishonesty

In case employees commit fraud, such as an alternation of cheques, information theft or even larceny, the company has to bear a strong loss of both financial and legal damage. A crime insurance policy covers the damages effectively. Employee dishonesty can include any type of fraud such as altering cheques or giving unauthorised access to a third party to a company’s sensitive information for financial gain.

Covers electronic fraud

The company can face a direct loss if an employee secretly transfers company funds for personal benefit or to any third party without the knowledge or approval of the company. A commercial crime policy covers this loss also.

Premise coverage

Premise coverage refers to the case where the employee has wrongfully absconded or has committed a theft of funds or computer assets. Also, in case there is a theft within the company premises, or a theft from the company locker or drawer, a commercial crime protection policy effectively protects.

Loss due to counterfeit currency

In case a loss occurs due to counterfeit currency and the business gets into a legal issue, commercial risk insurance covers all the damages occurring due to it. If the insured business can reproduce a receipt of the counterfeit currency, the crime insurance policy covers all the financial damage caused.

Importance of Commercial Crime Insurance for Businesses

India hosts one of the largest startup cultures in Bengaluru, an expanding MSME sector and almost 63 million small businesses. There is a high possibility that Indian businesses run a great risk of being victims of employee fraud, theft and forgery. A recent study by a media channel has directly come up with a report that 59% of Indian companies have been direct victims of economic fraud. This highlights the importance of having business crime insurance in the first place. Here are some of the key reasons why businesses should consider purchasing business crime insurance:

Enable a strong financial protection

Businesses can be overwhelmed while dealing with numerous financial losses at a time. Corporate crime insurance provides immaculate financial protection against losses arising from criminal acts or frauds, helping businesses maintain their financial stability in the long run.

Encourages businesses to operate with minimised risk

A business cannot operate for long in an environment of constant threat or risk, the financial incentive to operate diminishes in such a case. A commercial risk policy provides a financial buffer to minimize such risk, providing the business encouragement to continue with lower risk. You may also be interested to know the different types of business risks.

Safeguarding organisational reputation

Criminal activities can cause heavy damage to a company's goodwill, and also affect the brand image. Having a crime insurance policy coverage can help businesses to commit to protect their assets and also safeguard the stakeholders' interests.

Factors Affecting Commercial Crime Insurance Premiums

A commercial crime insurance policy can be complex to purchase without knowing the factors that affect it. These factors directly influence the price and period of the insurance, hence good to know early. Here is a compiled list that explains this concretely.

Nature and type of industry

In case a business is operating in an industry that has a higher risk of criminal activity, the business may have to pay a higher price for purchasing business crime insurance. For example, in the fintech and the insurance sector, companies often deal with massive risks, which surge the premiums paid.

Size of the company

In the case of larger companies with more employees and higher revenues, there lies a larger risk for the company because of higher financial responsibility. This may be another reason for increasing the insurance premium of a crime insurance policy.

Risk control policy

Different companies, especially with resolute policies for risk control, need to have insurance that ensures complete protection against any form of damage due to employee theft or burglary. A high-risk control policy may increase the premium.

Poor credit score

If a business has a history of a poor credit score, it can face a high premium. This directly implies that businesses that have a poor credit history usually may face a high premium.

How to Choose the Right Commercial Crime Insurance Policy

When selecting a commercial crime insurance policy, businesses should consider the following factors:

Identifying the major risks

Knowing the major risks can be the starting point for choosing the right insurance policy. A business can be subjected to various third-party risks such as cyber-attacks, or even major employee theft of company data. Finding out the major risk factors can help businesses determine the most suitable commercial crime insurance policy.

Checking coverage details

Understanding the major coverage details is necessary before purchasing a business risk policy. Every insurer has different coverages, as while some insurers may cover loss of property, it may not cover defence costs. Checking the exact policy wording and coverage details is vital in this scenario.

Understanding the discovery period tenure

The discovery period directly refers to the time that begins after the crime protection policy has expired. For example, a business has purchased a commercial crime policy which expires in December 2025. In case the business suffers an act of fraud or employee theft within or after the policy has expired, it can still claim insurance coverage during this discovery period. For this, the insured business needs to inform the insurer about the crime within this discovery period, which usually lasts between 30 - 60 days.

Checking for the deductibles

Considering the deductibles associated with the policy is also vital. Deductibles ensure that the business crime insurance is affordable for your business.

Know the CSR Ratio

The Claim Settlement Ratio (CSR) matters to a great extent, as CSR indicates the number of claims successfully settled by the insurer company in the past. Before purchasing a crime insurance policy coverage, the business needs to have a fair idea about the number of claims settled by the insurer in the past. Read more about the types of business insurance that your business can purchase.

Conclusion

Indian businesses are widely uninsured against commercial crimes. Cases of employee theft, or altered cheques can severely damage businesses, causing long-term negative repercussions. By understanding the coverage, importance, and factors affecting premiums, businesses can make informed decisions when selecting a commercial crime insurance. With competitive rates and fully customised features, Covrzy has suitable crime insurance for you.