Online Credit Card Fraud May Be Uninsurable
In general, businesses are frequently underinsured for crime losses. While Businessowners and commercial package policies usually have some coverage for employee theft, forgery and/or money and securities loss, limits are low and there may not be any coverage for computer fraud, funds transfer fraud or social engineering fraud. Even if a business has a stand alone Crime policy with all of the latest bells and whistles, some losses may not be covered.
Nationwide Insurance has just announced a new exclusion for computer fraud from the use of credit, debit, charge or other cards. According to their announcement this exclusion tracks with the standard insurance form and cannot be removed. We do not know if other insurers are using the same exclusion.
According to Nationwide’s announcement, fraudulent credit card transactions are a business risk better addressed by good risk management than by insurance. In a “brick and mortar” store credit card transactions other than by regular customers should require verification of the user’s identity. The same standard should apply to online transactions.
Some closing advice:
- Don’t underestimate your exposure to crime loss.
- In purchasing insurance, consider all risks and the worst case scenario for each.
- Whether or not your insurance covers, have controls in place to minimize the possibility of a crime loss.