Business Insurance Losses Slip Through Gaps In Coverage

In the intricate landscape of insurance, it’s essential for businesses to understand the nuances between various coverage types. A recent incident reported by Business Insurance Magazine serves as a prime example of how coverage distinctions can impact a company’s financial resilience.

Unveiling the Coverage Discrepancy

The incident in question involves Travelers Insurance paying a claim related to phishing under its crime policy. The company lost a significant sum, amounting to six hundred thousand dollars, due to a fraudulent scheme where a bad actor emailed fake invoices to the purchasing manager, who unknowingly approved the payment. While the crime policy came to the rescue in this scenario, the noteworthy aspect is the denial of the claim under the computer fraud coverage.

Distinguishing Between Coverages

  1. Crime Insurance:
    • The paid claim falls under the umbrella of crime insurance.
    • Crime insurance typically covers losses resulting from various fraudulent activities, including theft, forgery, and embezzlement.
  2. Computer Fraud Coverage:
    • The denied claim pertains to computer fraud coverage, a distinct type of coverage.
    • Computer fraud coverage usually addresses losses arising from unauthorized access, hacking, or fraudulent manipulation of computer systems.
  3. Cyber Liability Insurance:
    • The incident highlights the importance of considering cyber liability insurance.
    • Cyber liability insurance is a separate policy designed to protect against cyber-related risks, encompassing data breaches, ransomware attacks, and other cyber threats.

Closing the Gaps in Coverage

This example underscores the significance of comprehensively assessing your business insurance portfolio. While it’s not necessary to have every conceivable insurance policy, it’s crucial to identify and address potential gaps in coverage. Here are key considerations:

  1. Risk Assessment:
    • Conduct a thorough risk assessment to identify areas where coverage might be lacking.
    • Understand the specific risks your business faces, especially in the digital realm.
  2. Policy Understanding:
    • Know the details of each insurance policy in your portfolio.
    • Be aware of coverages, exclusions, and limitations in your existing policies.
  3. Endorsements and Additional Policies:
    • If you identify gaps or exclusions that pose unacceptable risks, seek endorsements or consider additional policies.
    • Tailor your insurance portfolio to your unique business needs.

Cyber Liability Insurance as a Stand-Alone Solution

In many cases, businesses opt for cyber liability insurance as a stand-alone policy. This approach ensures a focused and comprehensive coverage for cyber risks. Whether it’s data breaches, social engineering attacks, or other cyber threats, a dedicated cyber liability insurance policy can be instrumental in filling potential gaps left by other policies.

Informed Insurance Strategy

As you navigate the complex realm of business insurance, stay informed and strategic. Periodically review and reassess your insurance portfolio, especially considering the evolving nature of risks. In doing so, you empower your business with the resilience needed to weather unforeseen challenges.

Remember, the goal is not to have every insurance policy but to have the right ones that align with your risk tolerance and operational needs. For tailored insurance guidance and support, consult with insurance professionals who can assist you in crafting a robust risk management strategy.

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