Hidden protection: kidnap and ransom insurance
Kidnap, ransom and extortion (KRE) insurance has become a growth industry round the world because of increasing incidents related to this field. RISKAFRICA takes a look at this intricate insurance policy and discusses the benefits it can provide.
Who needs KRE?
KRE insurance is often thought of as an extra security measure, required only by high-powered businessmen and people who travel to high-risk areas. This is no longer the case and companies are seeing it as a necessity for all of their employees. “Corporates are beginning to recognise that kidnap, ransom and extortion insurance is not a standalone nice-tohave cover, but a component of their comprehensive duty of care corporate policy for employees,” says Dani Ettridge, crisis management, Aon South Africa. Kidnappings and extortion are not confined to millionaires and their families, business executives or celebrities, although they are often targeted and those are the most high-profile cases. Sometimes however, it is just a case of an ordinary person being in the wrong place, at the wrong time. Increasing incidents of victims being briefly held and forced to withdraw money from an ATM, or getting abducted by pirates while on a holiday cruise have made kidnapping a very real danger for everyone. Even companies need protection from extortion. “KRE insurance extends beyond cover for individuals, but also protects the company from threats by means of extortion to their reputation or intellectual capital,” explains Ettridge. An example of this might be a disgruntled former employee threatening to reveal trade secrets to an opposition company unless their demands are met.
Some may have KRE insurance and not even know it; it can often come as part of a corporate insurance portfolio, especially if the company operates in a high-risk area or its employees travel extensively. Unfortunately, a covered employee cannot know that the cover exists for them, or the corporation, or it will void the policy. The reason for this is that allowing a third party knowledge of such a policy would open up many doors for exploitation. “It is a firm condition of KRE policies that the existence of the policy cannot be revealed to a third party. KRE is a reimbursive insurance policy, which means the insurance company will reimburse a policyholder after a ransom is paid. The insurance company is not directly involved until an insured event occurs, so there is no reason for any third party to be aware the policy exists,” Ettridge explains.
Something else to consider when preparing a kidnap and ransom policy for a client is whether the policy coverage will be void in circumstances in which employees or representatives of the company collude in the kidnapping, such as a driver, even if the kidnapped has no part in the collusion. So be certain that any condition or exclusion in the policy is clear and understood in terms of the circumstances in which collusion is excluded.
There is a worry that kidnap and ransom insurance encourages the business of kidnapping and extortion. If a kidnapper finds out that a potential target is insured against kidnapping, they will expect and ask for exorbitant ransom fees, and the insured’s company or family might be inclined to pay whatever is asked because of the available cover. However, according to Ettridge, that is not the issue. “KRE insurance does not perpetuate the business of kidnapping and extortion, because these are criminal acts directed at companies, which it is believed will pay up irrespective of an insurance policy.”
KRE insurance extends beyond cover for individuals, but also protects the company from threats by means of extortion to their reputation or intellectual capital.
The numerous subtleties of kidnap and ransom insurance make it an incredibly complex cover to have, but the reason for this is that it is susceptible to fraud. Imagine how easy a kidnapping would be to pull off if the person being kidnapped, or the company they work for, is involved in the plot to scam the insurance company.
For those who can get past all the complexities and find themselves in a position where they need KRE insurance, it can provide valuable services and guidance in a troubling time. It is important to consider the individual needs of the client when negotiating what to include in the policy. Policies may include the following cover and benefits:
Ransom reimbursement: Ransoms paid for the safe return of a covered employee or family member in a covered event will be reimbursed by the insurer.
Personal accident: A lump sum benefit will be paid out in the event of a loss of limbs, loss of sight, loss of extremity, permanent total disablement or death of the insured, solely and directly as a result of a covered event.
Loss of ransom during delivery: The loss in transit of a ransom by confiscation, destruction, disappearance, seizure or theft while it is being transported.
Crisis team: Expenses related to deploying an independent and experienced crisis response team to help everyone involved get through the ordeal. “KRE insurance provides the financial security that ransom paid following an insured event will be reimbursed. But the real value behind having KRE insurance is not the money. Most KRE insurance policies provide unlimited funding for an experienced crisis response team to assist in dealing with an insured incident that could lead to a claim,” says Ettridge.
Travel expenses: Travel and accommodation costs incurred as a direct result of a covered incident.
Psychiatric expenses: Often people who are kidnapped require extensive psychiatric, medical and legal advice.
Reward payments: Rewards can be offered by a policyholder in exchange for information that contributes to the resolution of the covered event. Financial losses: Personal financial loss, suffered by an insured person as a direct result of being unable to attend to financial matters because of the kidnapping.
Loss of income: The kidnapped’s gross salary will be reimbursed for the duration of captivity. Some policies include bonuses, commissions and pension contributions.
Asset protection: This benefit is to cover interest on loans taken specifically to meet a ransom.
Security coverage: Expenses for security guards hired for the purpose of protecting members of the family and crisis response team that visit the location of the covered event.
Specialised equipment: Costs of communication equipment, recording equipment and advertising to help resolve an insured event.
Rehabilitation benefit: Rest and rehabilitation expenses that occur directly following the release of a kidnap victim.
Funeral expenses: Cost of repatriation of the body of the kidnap victim in the event of death during a covered event. This will typically include the costs of burial or cremation.
Most KRE insurance policies provide unlimited funding for an experienced crisis response team to assist in dealing with an insured incident that could lead to a claim.