Does insurance cover theft by deception?

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Strategic theft, aka theft by deception, is a growing risk to everyone in the supply chain. Shippers and 3PLs risk financial and brand reputation damage while customers face delays and disruptions. In these situations, insurance is key, and it’s important to understand what type of coverage will protect you. 

Here’s an overview of the limitations, benefits, and overall process behind cargo insurance claims involving strategic theft. 

Does cargo insurance cover theft by deception? 

Many companies employ cargo insurance as a last resort against risk, but that doesn’t mean it covers everything. For example, most policies cover theft or damage to the cargo itself. However, they might not cover property damage or loss beyond that, including stolen vehicles. This can already pose an issue, as collateral damage is always a possibility during strategic theft. 

Some policies also don’t cover thefts involving employees. Unfortunately, strategic thefts often include inside actors. Even if the shipper is unaware of their employee’s involvement, this could preclude them from coverage. 

Not all types of insurance policies cover all modes of transportation or locations, either. Even when they do cover high-risk or multiple areas, other issues can quickly transpire. For example, if a thief takes your cargo into a different country, your insurance coverage might still apply. However, the claims process will become vastly more complicated in terms of paperwork, customs requirements, etc.  

Thus, while it’s not wrong to say that cargo insurance covers strategic theft, the truth is, there are multiple instances where it won’t. Additionally, the process of filing a claim can be significantly more difficult, with payouts requiring significant man hours to process the claim on the insured’s side. The payout will also not prevent criminals who have already figured out how to penetrate your network from doing it again. 

For these reasons, while comprehensive coverage can keep you safe from strategic theft, it’s important to keep in mind that it should only be part of your solution. It’s also important to understand what information you need in order to file a claim. 

How does the insurance claims process work? 

Different providers will require different documentation and follow different processes. However, insurance claims usually involve the following steps:

1. Notification

To begin the claims process, you should notify your insurance provider of any strategic theft incidents as soon as possible. It’s important to share when and where the losses occurred, as well as the estimated value of your shipments. It can also help to provide detailed accounts of the stolen products.

2. Investigation

After you submit a claim, the insurance provider will open an investigation. At this point, they might ask for a police report or other verification that the theft occurred. The insurance provider might also request security footage or even interview your employees. In cases where part of your shipment was damaged, they will likely also ask to inspect it. 

It’s important that you work with your insurance provider to make this process as simple as possible. This might mean sharing documentation concerning your bill of lading (BOL), packing list or inventory, commercial invoice, and/or proof of ownership of the targeted vehicle. It also means continuing to work with law enforcement in an attempt to recover your goods.

3. Assessment

Once the insurance provider has all the documents and other intel they need, they will start assessing your claim. During this part of the process, they will determine how much coverage applies and whether there are any policy limits or exclusions. They might also ask for additional documentation if any information is missing. 

4. Payment or dispute

After assessing your claim, the insurance provider will either offer payment or explain why your situation is not covered. In cases involving strategic theft, a lack of settlement may be due to any of the reasons listed previously. In these instances, you may be responsible for losses. You’ll have the option to dispute this decision, which can require further documentation, negotiation, or even legal action.  

Why cargo theft coverage is only part of the solution  

Cargo insurance coverage offers peace of mind in the event something goes wrong. However, it’s always better to prevent risk than to try and recoup losses. Thus, rather than ask “Does insurance cover theft by deception?” it’s important to consider, “What can I do to protect myself from strategic theft?” 

Along with attaining liability insurance, the best insurance against theft is a robust and agile theft prevention policy. Working with companies like Overhaul can help you learn to identify, prevent, and respond to threats. We not only offer insurance solutions but also provide the tools to prevent theft by deception in the first place. From RiskGPT to our Intelligence as a Service, our approach ensures that you’re informed of and prepared against new and emerging risks. 

When it comes to insurance providers, we’re also here to assist. Our solutions help fight back against theft by fraud, which means you’re insuring more secure shippers and 3PLs. In this way, insurance companies can rest easy knowing that they’re being used as intended – as a last resort. Furthermore, this ensures that insurers can assist in situations where they’re needed, as they won’t be bogged down by situations that could have been avoided.  

If you’re a shipper looking to fortify your defenses with insurance, learn more about the relationship between risk and cargo theft. And if you’re an insurance provider looking to work with Overhaul, reach out to us today. 

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