Extortion Insurance: Is It Worth It?

If you look hard enough, you can find insurers willing to protect your business against virtually any calamity – from malpractice to equipment breakdown. But even in today’s crowded insurance market, the need to safeguard against extortion might seem like a bit of a stretch.
That is, until you look at international crime trends. Between 15,000 and 20,000 kidnappings take place around the world in a given year, according to insurance giant Aon. Most of these are done not for any ideological reason, but for profit. Often, an overseas traveler becomes a target because an assailant knows there’s a wealthy family or company that’s willing to pay for his or her safe return.
Extortion insurance is designed to help recoup whatever money has to to be paid by a policyholder in order to save someone – an employee, for example – from the threat of abduction or bodily harm. (If the abduction actually happens, the crimes then include kidnapping.) The policy may also protect against other threats, such as damage to company property or the disclosure of sensitive information. Given the risk – particularly in danger zones like Latin America and the Middle East – most big corporations today have a policy that covers both extortion and ransom demands.

Is It Worth It?

A specialty insurance policy can help companies recoup most of the expenses associated with an extortion plot. Often, that includes the money they directly pay to an assailant – or would-be assailant – as well as the cost of negotiators, lawyers and psychiatric care for any victims. Many insurance companies also offer crisis management services through an affiliated provider.
Extortion coverage isn’t strictly for corporations, however. Some insurers also provide policies to high net worth individuals, who can be just as big a target when they travel abroad. Generally speaking, the greater one’s public profile, the bigger the risk.
Certainly, extortion insurance isn’t something that every company or wealthy individual is going to need. And it can be very pricey.

But considering that experts say the threat is only increasing as criminals become more sophisticated – some even use social media sites to glean information about potential victims – this insurance is worth considering if you or a business is at greater-than-average risk. Added protection may be valuable, for example, if you or a company's employees routinely travel to hot spots like Venezuela or parts of Africa. There’s also the financial threat to factor in (even for the most profitable firms), as monetary demands have gone as high as $125 million.

Caveats About Coverage

One point to bear in mind is that extortion insurance almost certainly won’t reduce anyone’s risk of becoming a victim. In many cases, employers can’t even let their workers know about the coverage, which would make them ideal targets for criminals.
Also, if you’re thinking about buying a plan for yourself or your business, be advised that filing a claim isn’t always as straightforward as you might think. One complication is that most kidnappers specifically prohibit their victim’s contacts from notifying either the police or the insurance company about their demands. The catch: The insurer may not provide reimbursement if it’s not advised of the transaction ahead of time.
Therefore, it’s important to find a policy without this kind of stipulation, or to try to negotiate it out of the contract. Some insurers only require policyholders to divulge an extortion attempt when doing so won’t further endanger a victim.
In addition, some companies won’t extend coverage to countries where the U.S. government has put into effect a travel advisory. In such cases, there’s an unfortunate irony: The policy may be useless in the very circumstances when it’s most needed.
For potential policyholders, these caveats are all the more reason to research the insurance plan ahead of time to avoid surprises down the road.