47 percent of companies experienced fraud within the last 2 years, according to the Global Economic Crime and Fraud Survey 2020 by PwC. First-party acts such as employee theft are the most common type of crime that affects small businesses. But the loss they cause often pales in comparison to the kind of damage that professional criminals and other third-party players can do. Perhaps one of the best examples of external crime is cyber intrusion. 61 percent of all small and medium-sized businesses around the world reported at least one cyber attack during the previous year. These attacks result in massive disruption, reputation damage, loss of clients, and billions of dollars in financial losses each year.
Third-party crime insurance protects your Hong Kong business from direct losses associated with criminal activity executed by perpetrators outside your company. This type of coverage is not just important for established companies but also small businesses that are exposed to a wide range of external criminal threats.
Do I Need Third-Party Crime Insurance?
Cybercrime is often ranked as the number one threat facing businesses, business processes, and computer infrastructure. Others include forgery or alteration, theft, robbery, burglary, and fraud. Companies tend to lose much more than just money when impacted by these threats. Reputation damage resulting from highly publicized crime could lead to loss of customers and profitability of your company. Criminal threats could also have an emotional impact on business owners and employees, resulting in feelings of helplessness or anger that could negatively impact productivity.
Any business could be on the receiving end of external criminal activities. But companies within the following areas particularly need this type of coverage to safeguard against potential risks:
- Companies that deal with large quantities of cash.
- Businesses that have costly equipment within their premises.
- Firms that process large numbers of invoices and may be targeted by con artists.
- Companies that perform digital transactions or store valuable customer data.
A strong third-party risks insurance policy is an affordable and effective way to transfer criminal risks to the insurance company.
What Does Third-Party Insurance Cover?
Third party insurance in Hong Kong will cover a variety of potential business risks:
- Forgery or alteration - third party risks insurance will protect from the forgery or alteration of checks, promissory notes, and drafts by a third-party player. This includes actual loss of money or personal assets and accounts belonging to the company or its employees. Third-party insurance also reimburses businesses for forgery losses related to credit, charge, and debit cards.
- Theft of cash or property - the insurance policy will protect business cash, securities, checks, or other forms of cash that are stolen on-premise (within the company’s premises, a personal residence, or financial institution) or in transit. If the company’s property such as cash registers, cameras, and security equipment is damaged during criminal activity, then the policy will also reimburse for these losses.
- Fraud - businesses are typically subjected to paper currency fraud (counterfeit money) and computer fraud during the exchange of goods and services with a third party. Third party risks insurance will usually reimburse for the amount that is lost in fraudulent business activities and transactions.
- Cybercrime - small businesses in Hong Kong and elsewhere are faced with a wide range of cyber security threats, ranging from phishing and malware attacks to ransomware and social engineering. It seems like hackers are always working to compromise the integrity of business data and networks. Third party insurance in Hong Kong will indemnify your company in the event of cybercrime activity that results in losses. This coverage is a great addition to supplement your cyber liability policy.
What Does Third-Party Risks Insurance Not Cover?
While a third-party risk insurance provides important coverage for your business, it has certain exclusions.
- Criminal acts by owners or employees - third-party insurance will not take care of intentional acts of dishonesty or criminal activity by owners, partners, directors, or employees of a company.
- Income loss due to crime - the insurance policy will take care of third-party risks and associated losses. It does not pay for income lost due to crime-related downtime. If you need this type of protection, you may benefit from a business interruption policy.
- Crime-related liability - this type of coverage protects the insured from insurance third-party risks (resulting from crime), not liabilities that your company has to other parties due to those losses.
- Certain types of cybercrime - the third party policy will typically not cover a number of specific cybercrime activities, including social engineering attacks. It is important that your business also has cyber liability insurance for comprehensive protection from cybercrime-related activities.
- Accounting errors - errors made within your bookkeeping and accounting processes are typically not covered by a third-party insurance policy.
- Expenses of compiling proof of loss - third-party policies will not take care of the expenses associated with providing proof of loss. If you need to add this coverage, consider adding a claims/investigative expense benefits rider to your policy.
Cost Of Third Party Risks Insurance
Understandably, the cost of third-party crime coverage in Hong Kong varies based on a number of factors such as your annual revenue, the number of employees within your business, the security measures in place, the nature of office equipment you have, and the level of coverage that you intend to purchase. You may choose to purchase crime insurance coverage as a standalone policy or as part of a business owner’s or commercial package policy. Working with a trusted insurance broker in Hong Kong is a great way to ensure that you get the right plan from the insurance company that offers maximum value for money.
Business property and processes are often targeted by a variety of external criminal threats. Losses resulting from these risks are not covered by commonplace policies such as commercial property and general liability insurance. It is thus necessary for business owners to purchase coverage that can safeguard the company and its employees from theft, fraudulent activities, forgeries, and cyber threats that could damage your reputation and result in significant financial losses. While third-party commercial crime policies will vary from one provider to the other, they all ensure your peace of mind by safeguarding your company from typical criminal threats.
A third-party commercial crime policy can be a valuable protection for most companies but is particularly important for businesses that:
- Regularly transact in cash, check, or credit/debit cards.
- Often deal with inventory, stocks, or products that can be easily transported or stolen.
- Handle important financial records and sensitive customer data.
- Have limited funds to invest in comprehensive and sophisticated security systems and measures.
Crime insurance is not just for large, established companies. It also makes sense for the numerous small and mid-sized businesses in Hong Kong.
Third-party crime insurance will protect your business from a wide range of outside criminal risks, including but not limited to robbery, burglary, off-premise theft, computer fraud, counterfeit money, and forgeries or alterations. Keep in mind that the specific scope and conditions of the policy may vary from one insurer to the other.