Understanding Computer Crime Insurance: Coverage and Benefits

What Is Computer Crime Insurance?

Computer crime insurance covers a business's losses when employees misuse company computers to commit theft or fraud, which differs from cybercrime coverage aimed at external attacks. It can cover financial losses tied to employee dishonesty or error, including fraudulent transfers and unauthorized information exchange, depending on the policy.

How Computer Crime Insurance Protects Your Business

Computer crime insurance policies for businesses generally focus on the potential for electronic theft of money or securities or the improper transfer of proprietary information by an employee or contractor within the company. Such policies might even cover acts of vandalism.

Differentiating Computer Crime from Cybercrime: What You Need to Know

At least in the view of insurance companies, computer crime differs from cybercrime. The latter covers business losses that are directly due to external operators misappropriating or misusing confidential information. Cybercrime is caused by a security breach. This is often carried out with the unwitting assistance of the company's employees.

Computer crime insurance covers financial losses caused by employee dishonesty or error.

Computer Crime Laws and Regulations

The Computer Fraud and Abuse Act is a civil and criminal law that prohibits a number of computer-related crimes such as obtaining information through the unauthorized access of computers; engaging in computer-based fraud, deliberately causing damage to computers by introducing a virus or other malicious code, and other malfeasance involving computers.

Wrong-doing can include simple acts such as "typo-squatting" (registering slight misspellings of familiar sites or product names to rack up accidental hits), or the more exotic crime of "salami-slicing" (stealing tiny amounts of money from many transactions).

Nevertheless, computer crime insurance coverage is often concerned solely with the transfer of information or property from within a company by its employees or contractors for criminal purposes.

The degree of risk that a company faces when it comes to crimes committed through computers is hard to estimate. A company may recognize that it needs to create a firewall to prevent employees from transmitting certain types of data, but creative employees can circumvent firewalls.

And these days, when everyone has a smartphone, computer crime insurance policies may have to specify which devices are considered computers as well as what activities done on them may constitute a crime.

Blanket Bond Coverage: A Safety Net for Businesses

Computer crimes perpetrated by a company's employees may also fall under a firm's blanket bond coverage, which protects a company from damage caused by its employees or contractors.

Blanket bond coverage is normally carried by brokerages and other financial institutions. As the name implies, these cover a company's legal costs related to a wide variety of internal malfeasance. In Australia, a blanket bond is called, appropriately, "employee dishonesty insurance."

The Bottom Line

Computer crime insurance covers a business's financial losses from internal computer misuse by employees or contractors, which can include theft, fraud, or vandalism depending on the policy. It differs from cybercrime insurance that targets external attacks and breaches, while laws such as the Computer Fraud and Abuse Act often shape how these incidents are treated.