 |
 |
 |
|
Getting tough on crime CNA's Crime Pack protects private and nonprofit entities By Elisabeth Boone, CPCU Most of us remember McGruff the Crime Dog®, the cartoon canine who locked his jaws on a burglar’s backside to “take a bite out of crime.®” Although the McGruff campaign and various other initiatives unquestionably have helped reduce crime, the fact is that crime is still taking a bite out of businesses and other organizations. We tend to associate white-collar crime with high-flying headline grabbers like WorldCom’s Bernie Ebbers, Dennis Kozlowski of Tyco, and Enron’s CEO, the late Ken Lay. Given the pricey attorneys and nationally televised perp walks that put the spotlight on these big kahunas, it would be easy to forget that crime also affects both privately held companies and nonprofit entities. Unlike large corporations, these organizations may not have the financial resources to absorb an uninsured crime loss. To meet the needs of this important market, CNA’s Management and Professional Liability Division developed Crime PackSM, which offers a broad array of coverages that can be tailored to an insured’s specific situation. Few people are better qualified to develop such a product than Kevin Donohue, a P&C underwriting consultant at CNA whose career spans some 27 years in the fidelity and crime insurance arena. For several years before joining CNA, Donohue was involved in underwriting directors and officers liability, employment practices liability, fiduciary liability, and miscellaneous professional liability. “I joined CNA in March of 2004, and I immediately started working on Crime Pack,” Donohue says. “I worked with a team of people from the actuarial, claims, legal, marketing, and IT departments to develop and successfully launch the product.” Broad appetite Crime Pack was introduced in October of last year and is now available in all 50 states, Donohue says. Designed with significant input from producers, the product has a simplified application that requires only total employee headcount, and a rating plan that streamlines the submission and purchasing process. The policy is available to a wide range of businesses, including manufacturers, wholesalers, and distributors; small retailers; property managers; contractors; computer technology companies and consultants; business service firms; employment and temporary help agencies; trade associations; membership organizations; and law firms, excluding firms that hold money in escrow. Coverage also can be arranged for government entities, and foreign coverage may be available for qualifying risks. Class eligibility is closely aligned with CNA’s appetite for private D&O, employment practices liability, and fiduciary liability. Classes not eligible for Crime Pack, but covered elsewhere at CNA, are banks, stockbrokers, insurers, and finance companies; mortgage bankers and brokers; homeowner and condominium associations; nursing homes and long term care facilities; and publicly traded commercial corporations. In distinguishing the crime exposures of publicly held corporations from those of privately owned companies and nonprofits, Donohue says a key factor is size. “There are some giant private companies as well as some giant not-for-profits,” he observes, “but entities in our niche tend to be much smaller, so the underwriting approach is a lot different. Generally speaking, these entities are not as prone to catastrophic losses, so the experience for private companies on commercial crime has been a lot better than for public companies.” As a result, Donohue explains, “On the application, we ask only the questions that we think we really need to know, making sure that the insured’s internal controls satisfy our criteria. Loss prevention and control for smaller and mid-sized companies already exist in the form of an independent CPA audit.” Employee theft For privately held companies and nonprofits, as well as publicly traded corporations, Donohue says, “Employee theft has the greatest potential for catastrophic loss.” Within that category, he says, “the type of loss with the largest potential is fictitious vendor schemes. That’s where a dishonest employee sets up a dummy bank account and has the company direct funds to that account for nonexistent or overpriced goods or services.” Another significant exposure that is addressed by Crime Pack is the theft of client property by employees of the insured. The hottest target, and one of the easiest to steal, is laptop computers. “Coverage for this exposure is very important to a lot of our insureds,” Donohue says. “It can make the difference between the insured being able to secure a lucrative contract and not being able to. If the insured will be on the client’s premises, often the client will want to have that coverage in place.” What’s more, he adds, “We have the ability to offer scheduled client loss coverage when a client wants proof that its particular property is covered for that exposure.” Agent input In response to agent feedback, Crime Pack incorporates a number of coverages that otherwise would have to be added by endorsement. “We heard a lot from agents after the fact about a loss that wasn’t covered under the fidelity policy but might have been covered under an optional coverage had they requested it,” Donohue says. “We tried to put some of those optional coverages into the main policy.” He offers an example. “Almost all agents who handle crime coverage know that there’s what’s called outgoing check forgery coverage, so if any of the insured’s checks are taken by a non-employee resulting in a loss to the insured, there’s coverage available on most crime policies,” Donohue explains. “Fewer agents are aware that there’s also an optional coverage for credit card forgery. And only agents who are really crime experts know of something else called personal accounts coverage, which extends the forgery coverage to include not only the insured’s bank accounts but also the personal bank accounts of the proprietors, owners, and officers of the insured.” Both credit card forgery and personal accounts are automatically included in the forgery coverage provided in Crime Pack. Agent input, Donohue says, also had a great deal of influence on the design of the Crime Pack application. “One of the problems for agents over the years was that, on most crime policies, the main rating factor is what we call Class 1 employees,” he explains. “Many decades ago, crime underwriters figured out that, of all an insured’s employees, the ones most likely to cause a claim were the officers and the people who handle money, so rates were based primarily on the number of these Class 1 employees. “But that’s a headache for the insured, because on the app, he or she not only has to report the total number of employees, but also give a breakdown by category of all these employees by specific position,’” Donohue continues. “The main rating factor for Crime Pack is revenue. The total employee count is an adjusting factor. We designed the app this way with agents in mind and to give a fairer price for accounts that have a lot of revenue but very few employees. For over 90% of our insureds, all the agent has to give us are the total revenue and the total number of employees. If the insured has retail locations or foreign locations, we do need more information.” Tailored coverage Working with an insured, an agent or broker can tailor Crime Pack to meet that insured’s specific needs. Optional coverages include: • Employee theft: Automatic coverage for leased employees, noncompensated directors and officers, volunteers, fund solicitors, and any benefit plans required to be bonded under ERISA; inflation guard feature covers increases in plan assets during the policy period • Employee theft of client property: As described above • Forgery or alteration: Covers corporate checks and credit or debit card instruments; personal accounts coverage includes theft by employees • Theft, disappearance, or destruction: Automatic inside/outside coverage of money (cash, checks, money orders, etc.) and securities (stocks, bonds, etc.) • Robbery and safe burglary: Automatic inside/outside premises coverage for other property (property that does not fit CNA’s definitions of money and securities) • Counterfeit money orders and currency: Covers currency of any country at no additional cost • Computer and funds transfer fraud: Computer fraud and wire transfer communications fraud combined into one coverage • Built- in omnibus wording provides automatic coverage for any entity in which the applicant has 50% or more equity, including joint ventures, LLCs, and partnerships How’s it doing? How has Crime Pack been performing since it was launched a year ago? What are agents saying about the new product? “We’re getting very positive feedback,” Donohue responds. “For the first six months that Crime Pack was available this year, total new business was up 40%. I think that’s a reflection of the breadth of the coverage, and of the fact that on our Web site (www.cnapro.com) we have some marketing materials that help the agent explain the Crime Pack coverages.” The streamlined application, he adds, makes quoting much easier, “so we’re getting back to agents with broad coverage quotes in a much shorter time frame.” Voicing strong enthusiasm for Crime Pack is Chris Cavallaro, cofounder and president of ARC Excess & Surplus, LLC, in Garden City, New York. “Crime Pack has all-encompassing, state-of-the-art coverage,” Cavallaro says. “It’s menu driven, and I like the fact that I don’t have to negotiate every part of the coverage. It’s an excellent product for small to medium-sized businesses; it’s better than just about anything out there.” Enhanced coverage, simplified rating and applications, and a wide-ranging appetite clearly are driving the success of Crime Pack in the growing market of privately owned companies and nonprofit entities. * For more information: |
|
|||||||||||||||||
| ||||||||||||||||||
