Commercial Crime Insurance




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    Commercial Crime Insurance

    Commercial Crime Insurance Commercial crime insurance policy is also known as Business Crime Insurance and is designed to cover the losses arising out of internal and external perils related to business such as fraud, forgery, theft, burglary etc. There can be large losses which are compounded over a period of time in a business due to the dishonest acts of internal and external stakeholders of the business and these losses can be covered under the commercial crime insurance policy. The policy covers first party losses only and that too in case of tangible properties such as money, assets, merchandise, securities etc. due to an act committed by the staff or an external miscreant. Commercial crime insurance policy is known as business crime insurance as it is designed to cover the losses arising during the course of business only and it doesn't cover individuals for their dishonest acts.

    There are many instances where employees of an organization are found to engage in dishonest acts and embezzle the funds thereby leaving the organization in a lurch. These kinds of acts could damage the reputation of the organization as well as cause financial losses. Crime insurance is designed to cover only named perils and any loss arising out of these named perils would only be covered under the policy. Here are the details of coverage that would be applicable in a commercial crime insurance policy.


    There are 5 types of covers available in commercial crime insurance which can be related to the internal and external perils faced by a business.

    This section covers the loss of money, security or other property of the business owner through forgery or theft by an employee who can be identified by the business. This cover also would cover the dishonest acts of the employee such as embezzlement of funds etc. For instance, if an employee in your business is swindling funds as pilferage and this issue came out after a period of time, then the theft of such an employee would be considered for settlement under the commercial crime insurance policy. In another instance if an employee commits fraud by favoring another person thereby causing loss to the organization would also come under this section. For example, if your employee favors a particular vendor and transfers the money to them without your knowledge it would result in employee dishonesty and is covered under the commercial crime insurance policy.

    The term “Employee” has been defined clearly in the policy terms and conditions. An employee means:

    • It is possible to cover any person working for the insured as long as the insured retains the right to direct, oversee and supervise that person. This compensation can be in the form of a salary or bonus.
    • Director, officer, partner or trustee of the insured performing the acts that fall within the purview of the employee as defined above. In simple words, if the director or any other officer of the insured is performing the duties stipulated for an employee, then they would be considered as an employee.
    • A former employee will be covered by insurance coverage for 60-days from the date that the person terminated their services, unless the incident involved an actual or suspected fraud or dishonest act.C
    • Any guest, intern, volunteer, secondee pursuing studies or getting work experience while performing the duties of an employee as prescribed above.
    • Any trustee or fiduciary of any plan.

    This section covers the losses arising out of destruction, disappearance, wrongful abstraction or theft of money or any other securities by a third party from insured’s premises. Premises can mean any land or building owned or possessed, occupied or used by the insured to carry out its ordinary business. For instance, if your building is ransacked by a third party for whatever reason, then the premises coverage would be applicable in commercial crime insurance policy. Third party can be any natural person, other than a member of staff of the organization or an individual colluding to benefit the organization. A person in collusion with an employee would be considered as third party if such person works for or represents a company with which the insured is dealing with such as carrying out business transactions.

    The definition of third party is very clear in the policy and would be extended to any person working in collusion with the employee of the organization to cause loss or damage to the premises of the company insured under business crime insurance policy.

    A transit insurance policy protects you against the destruction, loss or theft of your money and securities by someone else outside your premises. Transit means any movement of insured’s property outside the premises of the insured by an employee duly authorized by the insured in an armored motor vehicle other than postal service or private vehicles. For the transit cover to be applicable, the loss should have happened outside the premises of the insured i.e. while transporting the insured property from one place to another by an employee of the insured in an armored vehicle. For instance, if your employees take your money from a business location to a bank in an armored vehicle and in the process if there is an attack by a third party leading to abduction of the property, then it is covered under the transit cover. This section covers the loss or damage caused by the third party and not by the employee of the insured.

    This section provides protection against the losses caused by a third party to the insured using instruments like cheques fraudulently drawn on account of the policyholder. A third party's forgery, alteration or modification of a negotiable document upon which an insured relied or acted is considered a "forgery". Forgery can be defined as handwriting or singing the name of a genuine person thereby impersonating them to withdraw money or for any other benefit. It is important to note that this section covers the forgery done by a third party only and excludes any forgery done by the employee of the insured. For instance, if a third party has used your cheques or some other instruments to withdraw the money in your account by any forged means, then the loss suffered by the insured would be covered under this section in a business crime insurance policy.

    This section is an extension to the forgery section in which the computer fraud committed by the third party resulting in losses suffered by the insured is covered. This section covers the cost incurred by an insured as a consequence of computer-related violations. For instance, if someone has gained access to your computer without you giving them access and has caused loss to you, then the same would be covered under the computer fraud section of the business crime insurance policy. A computer fraud is the intentional and criminal theft of insured property arising directly from:

    • Third-party fraudulent modifications or deletions of electronic information or the entry of false electronic data directly in computer systems without prior authorization by the insured.


    There are certain exclusions under the commercial crime insurance policy which are mentioned below:-

    • Any loss arising out of employee’s fraud or crime even after knowing the prior history of fraud commitment by the employee.
    • Negligence or acts of omission resulting in direct or indirect losses to the insured.
    • Losses arising out of the acts committed by partners or directors except when they are performing the duties of an employee.
    • Direct or indirect loss due to the conduct of major investors. Major shareholder is the one with who owns and controls more than 10% of the share capital or issued voting rights.
    • The loss may be consequential or of another nature.
    • The loss of life or property caused by radiation, pollution
    • Losses caused by war, civil or insurrection wars, rebellions, revolutions and military or government action.
    • Losses caused by theft or fraud by the insured’s partner except when they are performing the duties of an employee
    • Losses incurred due to the cost of reproduction of any information contained in manuscripts, records or accounts that are damaged.


    • The policy also covers the extra costs incurred by the insured at the time of loss or damage. For instance, if you have suffered a computer fraud you may require a temporary replacement of the computer to carry out your regular operations or if an employee has committed fraud you may need a temporary employee to perform the day to day activities. In such cases the commercial crime insurance policy would provide you with additional expenses that would be incurred on transporting the equipment or documents or arranging a temporary employee.

    Key Features/ Key Terms

    Here are the key terms and key features of the commercial crime insurance policy.

    • Discovered or Discovery is supposed to occur when the insured or any other representative of insured who is not in collusion with the person commiting internal crime or external crime become aware of the situations of acts of omission that would lead to loss.
    • Discovery Period means the period immediately after the end of the term of insurance policy, when an insurer is informed of any crimes committed internally or externally prior to that date and which were discovered in the same time frame. The Discovery period is similar to the grace period in which the coverage would be applicable only for reporting the crimes that happened during the policy period.
    • External Crime is any act of criminality or fraud that has been committed by anyone other than an employee. It includes theft, burglary on and off premises, while in transit as well, faked instruments, counter fittings, computer fraud, and money transfer fraud.
    • Internal Crime includes any fraud, criminal activity or theft committed solely or jointly by employees or other individuals with the intent to damage an insured.
    • Natural Person means an actual human being. It does not mean a fake or fictitious legal personality.
    • Property includes cash, money contracts or other instruments with an intrinsic value. It also includes certified securities, negotiable documents, and certificates. Insurers aren't covered for land, buildings, or any other immovable property.

    Benefits of Commercial Crime Insurance:

    • Employee Fidelity Cover

      The main advantage of taking a business crime insurance policy is that it covers the employee’s fidelity which is the main concern for many businesses. For example, you have a business in which you have employed a few people for carrying out the regular work in the company. One bad day you find that one of your employees had run away with some money without your knowledge. In such cases you would have the option of filing a police complaint against that particular employee and when the policy catches the employee and if they were able to recover any amount of money, that would be given to you by the court and for this to happen it could take a long time. But, if you have a commercial crime insurance policy you could get the compensation from the insurance company for any fraud acts of your employees. Commercial crime insurance policy can compensate you for the losses caused by your employees whilst they are working or within 60 days they have left the job in your company. Employee fidelity is mainly useful when the employees are dealing with cash and other valuables of the employer.

    • Blanket Cover

      The other advantage of commercial crime insurance is that it comes as a blanket cover. A blanket cover is that which provides more than 2 insurance coverages in a single insurance policy. For instance, commercial crime insurance policy provides coverage against internal crime and external crime. If the crime is committed by the employees, then it would be covered under the internal crime section whereas if the crime is committed by the third parties it would be covered under the external crime section. Under the internal and external crime there are various perils for which the cover would be applicable and these perils include fidelity, computer fraud, transit cover, depositors forgery cover etc.

    • Legal costs cover

      A commercial crime insurance policy indemnifies the policyholder against all investigation costs and other legal costs that could arise due to an act committed by an employee or a third party. Also covered are the expenses of recovering the computer violations that were committed by a third-party. There can be instances where the employees are strong enough to overpower the management and in such cases this policy would be very much helpful to the employers.

    • Covers Internal and External risks

      There could be internal as well as external risk for an organization and it should be in a situation to safeguard itself from all these risks. Commercial crime insurance policy provides all round protection to the businesses as it covers both internal as well as external risks which can emerge at any point of time. The policy covers the internal risk such as employee fidelity and external risks such as third party forgery or computer fraud up to the sum insured limit. Businesses can have peace of mind if they take the business crime insurance policy as it provides complete protection to them by covering the risks that can arise during the course of business.

    • Affordable Premiums

      Another advantage is the fact that commercial crime insurance policies are very cost-effective. Any business owner can purchase the policy without having to think of the premiums as the premium would depend on the number of employees in the organization, revenue generated by the business, type of industry and the location of the business. The premium also depends on the established security systems and other control systems such as financial control and high-value assets control within the organization. If there are adequate controls enforced in the organization, one can expect to get the policy at lower premiums and at the same time with high coverage.

    Commercial Crime Insurance Claim Process:

    Commercial Crime Insurance Step 1: The first step in the claim settlement process in business crime insurance policy is to register the claim with the insurance company. Insured has to fill the claim form duly and sign it before submitting to the insurance company. The form should contain the details of the incident clearly and also state the amount of loss tentatively. Insurance companies would then generate a claim intimation number which can be used to track the claim in the future.
    Step 2: The next step in the process would be taken by the insurance company by appointing a surveyor to examine the details of loss and other related details. For this to happen the insured should provide all the relevant and required documents to process the claim. Once the surveyor completes the survey of the claim, then the claim would proceed to the next stage.
    Step 3: In this step, the survey report would be sent to the insurance company and the claims team would verify the authenticity of the claim. Once the authenticity is verified and they are satisfied, the claim would be sent to the next state for processing it. Once the claim is processed, the claim amount would reflect in the bank account of the insured within 7-15 working days.

    Documents required for Business Crime Insurance Policy Claim Settlement:

      Commercial Crime Insurance
    • Duly filled and signed claim form containing the details of the claim and other relevant details.
    • Policy investigation report
    • Internal investigation report
    • CCTV footage showing the happening of a crime
    • Termination letter or proof of termination of that particular employee from services
    • Any record that can substantiate the amount of claim as required by the insurance company Other additional documents as required.


    Commercial crime insurance policy can be taken by any business establishment in India. If a business thinks that it may undergo any of the perils covered under commercial crime insurance policy, then it should take the policy without hesitation.

    For more details on commercial crime insurance or business crime insurance please visit Ethika insurance broking and have a call with our insurance experts.