Combating crime with insurance: Small businesses’ risks evolving

Today’s small businesses face an ever-evolving roster of risks and emerging liabilities.

Although the growing digitization of small business processes has presented new exposures, traditional crime risks remain key areas of concern for small business owners as they look to protect themselves against possible impacts to their operations.

Regardless of how long a company has been in business, there is no better time than the present to re-evaluate crime insurance coverages. In fact, the recent 2018 Small Business Risk Report by Forbes Insights and The Hanover showed that 72% of small business owners reported facing crime-related risks in 2018. Yet, only 37% claimed to have strong confidence in their insurance programs.

The good news for many small business owners is that independent insurance agents can provide valued counsel.

Following are some considerations insurance agents can use to guide their business owner clients when selecting crime coverage.

Coverage limits beyond the standard policy

As agents well know, it’s critical that business owners recognize crime insurance isn’t always automatically covered under most standard policies — and if it is, standard policies likely offer low limits, leaving small businesses at risk.

To address this issue, agents are carefully assessing crime risks for small businesses and are offering strategic counsel on coverages and limits where needed. This can mean including key commercial crime coverage on business owner’s policies or commercial package policies to provide small businesses with a more convenient, bundled solution.

Addressing the top 3 risks

It’s also important for business owners to recognize the value of partnering with an independent insurance agent when it comes to identifying and addressing some of the most common crime risks that many small businesses face, including employee theft, vendor and contractor risks, and off-premises customer property theft.

1. Employee theft

Employee theft or dishonesty can pose a real risk and have significant financial implications for a small business. Theft occurs more frequently than many small businesses may think and can be difficult to detect. In fact, it often is not discovered right away and can go undetected for a period of time that extends well beyond what is typically included in standard business owner’s policies or commercial package policies.

Related: Know the difference: False pretense vs. theft coverage

For example, an employee may be charging personal expenses to a company credit card over many years, with the theft going unnoticed by the business. This presents an excellent opportunity for agents to advise their clients to consider additional limits or added coverage to ensure the proper level of protection is in place.

2. Vendor and contractor risks

As agents know, a vast number of small businesses use contractors, such as consultants, vendors and other professionals, to conduct business and enhance their service offerings for clients. It’s always a good idea to ask small business clients if they work with contractors, in order to ensure their insurance policies reflect the inherent risks that come with these types of partnerships. Doing so can help protect businesses if they were to have an issue with a contractor that results in a loss for the business.

Related: It’s never a bad time for a supplier risk review

For example, if a small business using an outside, non-employee accountant falls victim to money laundering by this accountant, the business typically would not be protected because this individual was not covered under the traditional employee dishonesty coverage. To protect against this growing risk, increasing money and securities limits can help provide additional coverage for these situations and is a key component of crime coverage for small businesses.

3. Off-premises customer property theft

Many small businesses provide services on their clients’ premises, whether in a home, an office or a store, giving employees access to clients’ property, which can present some risks. For example, a janitorial service responsible for cleaning a jewelry store could be accused of stealing jewelry. In this case, a standard insurance program may not cover this type of claim. Stand-alone crime coverage can provide protection in instances like this, beyond what is typically included in a standard business owner’s or commercial package policy.

Agents are critical in helping to mitigate these risks, as they carefully assess their small business clients’ specific vulnerabilities, look at their reliance on third parties, evaluate their tendencies to conduct high-value business transactions and examine their levels of international crime risks. All of these can point to the need for other stand-alone coverages.

Partnering with a carrier that provides the ability to add limits or stand-alone coverages enables independent agents to offer insurance programs that can adjust as clients’ risks evolve and become more sophisticated, creating a long-term solution for clients.

Ensuring small businesses are protected

Often, increased limits or the addition of à la carte crime coverages — such as supplements to standard policies — can provide the added protection small businesses need to guard themselves against crime risks and operate with peace of mind.

With just over a third of small businesses reporting they have strong confidence they are properly insured, independent agents are well positioned to provide valued counsel as their clients look for expert advice on their insurance programs, helping to protect themselves from crime risks for years to come.

Related: Most small business owners feel they don’t have adequate insurance

Chip Hamann is chief underwriting officer of small commercial at The Hanover Insurance Group. To reach this contributor, send email to media@hanover.com.