The Growing Importance of Crime Insurance

Crime is a major loss driver for many businesses, but many standard insurance policies do not adequately cover crime. As crime rates are increasing, brokers need to work with their clients to understand coverage gaps, manage risks, and secure appropriate crime insurance.

Overall Crime Levels in the UK

Recent figures show that crime is on the rise in the UK.

According to the Crime Outcomes in England and Wales 2022 to 2023, police-recorded crime levels for most crime types have increased. Total offences (excluding fraud and computer misuse) were up by 5% compared to the previous 12 months, which represents an additional 5.5 million offences. Although crime levels decreased at the start of the COVID-19 pandemic, they have since risen and are now 5% higher than before the pandemic.

The report shows there was an even larger surge in fraud offences, increasing from 976,093 in the year ending in March 2022 to 1,125,168 in the year ending in March 2023. This represents an increase of 15%.

Businesses are often the targets of these crimes. The 2022 Commercial Victimization Survey found that 28% of business premises in England and Wales had experienced a crime in the previous 12 months: 15% experienced theft, 9% experienced burglary, 9% experienced vandalism, and 7% experienced assaults or threats.

Emerging and Evolving Risks

Aided by new technologies and shaped by social issues, the nature of crime continues to evolve.

• Retail Theft: Retail theft is a growing problem. The British Retail Consortium says retail theft increased by 27% in 10 of the largest cities in the UK, although some cities saw surges of up to 68%. Criminals are also becoming bolder: incidents of violence and abuse against retail employees have nearly doubled from pre-pandemic levels.
• Social Engineering Scams: In social engineering scams, criminals attempt to manipulate individuals. Common examples include phishing and business email compromise scams. The National Economic Crime Centre says business email compromise (also called payment diversion fraud) cost the UK economy approximately £152 million in the year ending September 2021. There is also a concern that new AI-powered tools will result in more convincing social engineering attempts. In one alarming case, Gizmodo reports that a man in China lost 4.3 million Yuan after a scammer used deepfake software to impersonate his friend’s face and voice.
• Cyberattacks: The 2022 Cyber Security Breaches Survey found that 39% of UK businesses had experienced some sort of cyberattack in the previous 12 months, including phishing, denial of service, malware, and ransomware. Of the businesses reporting a cyberattack, 31% were attacked at least once a week and 20% reported a negative outcome.

Reviewing Your Crime Coverage

Businesses can protect themselves from crime by implementing good risk management policies – from on-premises security to cyber awareness training. However, some risk of crime will always remain. Therefore, insurance is another important element of any risk management program.

A commercial property insurance policy may provide coverage for some types of crime, such as vandalism and burglary. However, it may exclude many other types of crime, including employee crime, fraud, cybercrime, and kidnapping. Businesses can obtain additional coverage under other insurance policies, such as fidelity guarantee, crime, cyber liability, and kidnap and ransom insurance.

When reviewing insurance coverage for crime, determine if your clients have coverage for:

• Property crimes committed by third parties. Consider the limits and whether your policy excludes any specific types of losses.
• Social engineering crimes and fraud. A single instance of payment diversion fraud can result in major losses. Businesses are often unable to recover any funds they send.
• Fraud committed by employees or disgruntled former employees. Employees often have access to company accounts and assets. Many cases of fraud and theft are committed by someone in the company.
• Ransomware and other cyberattacks. Determine what losses your policy covers, such as business interruption losses, system recovery costs, forensic investigations, regulatory fines, and ransom demands.
• Kidnapping and ransom of employees who do business abroad. If executives are traveling to countries where kidnapping is a known risk, you should consider this coverage.

Do you need help securing crime insurance for your clients? Costero Brokers offers creative solutions for your coverage challenges. Contact us.