Online Credit Card Fraud May Be Uninsurable

Online Credit Card Fraud May Be Uninsurable

June 6, 2018 Business Insurance and Risk Management, The Beacon Blog 0 Comments

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.

About the Author

Harry Cylinder

Harry Cylinder, CPCU, ARM has spent nearly fifty years in the insurance industry, the majority of the time as a consultant. He has been employed by The Beacon Group of Companies since 2008, specializing in the review and analysis of property and casualty coverage forms. Mr. Cylinder has been reviewing policy forms as they have evolved over the past decades. In 2008 he published an article in the CPCU Journal which was the first description of cyber insurance coverage for a general insurance audience. Since that time he has regularly written on cyber and other topics for The Beacon Companies’ blog.