Combating crime with insurance: Small businesses' risks evolving

Today's small businesses face an ever-evolving roster of risks and emerging liabilities. While 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 your company has been in business, there is no better time than the present to re-evaluate your crime insurance coverages. In fact, the 2018 Small Business Risk Report by Forbes Insights and The Hanover showed that 72 percent of small business owners reported facing crime-related risks. Yet, only 37 percent reported 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 you can use as you work with your independent insurance agent to help select crime coverage.

Addressing the most common crime risks

It's important for business owners to recognize the value of partnering with an independent 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.

  • 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 you 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. 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. Because of this, small business owners should consider additional limits or added coverages to ensure the proper level of protection is in place.
  • Vendor and contractor risks. 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. If your small business works with contractors, be sure that your insurance policies reflect the inherent risks that come with these types of partnerships. Doing so can help protect your business if you have an issue with a contractor that were to result in a loss for the business.
    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 since this individual was not covered under their traditional employee dishonesty coverage. To protect against this growing risk, increasing money and securities limits can help provide additional coverage for these types of situations and is a key component of crime coverage for small businesses.
  • 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.

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

Partnering with an insurance 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 their clients.

Ensure your small business is protected

Often, increased limits or the addition of a 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. Your independent agent can help provide counsel as you look for advice about your insurance program to help protect your small business from crime risks for years to come.


About the author
Chip Hamann serves as The Hanover's Small Commercial chief underwriting officer. In this role, he leads a team responsible for determining the underwriting strategy, state management, product and point of sale offerings. He also oversees the field underwriting teams. He and his team partner with actuarial, product, technology, corporate underwriting and marketing to continually assess and evolve The Hanover's underwriting strategy to help position The Hanover as a carrier of choice for agents in Small Commercial.

. LC NOV 2018-548