Computer Crime Insurance

Computer Crime Insurance

Investopedia / Zoe Hansen

What Is Computer Crime Insurance?

Computer crime insurance covers losses to a business from crimes committed through the misuse of its computers by company employees.

Such policies are one option on a long list of insurance policies that can be purchased by businesses or individuals to cover a wide range of crimes, including identity theft, credit card fraud, cyber extortion, fraudulent money transfers, and theft of cryptocurrency from electronic wallets.

Understanding Computer Crime Insurance

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.

Key Takeaways

  • Computer crime insurance covers the misuse of company equipment by its own employees.
  • Cybercrime generally deals with a wider range of malfeasance such as hacking by outside actors.
  • Blanket bond coverage may cover internal and external threats.

Computer Crime vs. Cybercrime

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 Law

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.

In Australia, blanket bond coverage is called "employee dishonesty coverage."

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

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."

Article Sources
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  1. Congressional Research Service. "Cybercrime and the Law: Computer Fraud and Abuse Act (CFAA) and the 116th Congress," Summary Page. Accessed Feb. 6, 2021.