According to the Insurance Information Institute, executives and security officers are now more vulnerable to kidnapping and abduction both here in the United States and internationally. Between 1996 and 1999, 6,395 kidnappings were reported worldwide.
Annual totals for kidnappings grew more than 100 percent from 1995 (830 kidnappings worldwide) to 1999 (1,728). The combination of political unrest, poverty and lawlessness are the main reasons that kidnappings have increased.
“More and more, companies are becoming global and as such, their employees, who may travel abroad, are being exposed to potential kidnapping,” said Loretta Worters, vice president of the I.I.I. “Policies, be they from companies or personal policies, are something executives traveling overseas may want to consider.”
Kidnap and ransom insurance is not a new product. In fact, it was initially offered in 1932 by Lloyd’s of London, shortly after Charles and Anne Lindbergh’s baby was kidnapped by Bruce Hauptmann (Hauptmann was executed in 1936). However, at that time it was primarily reserved for only a few companies or individuals that fit certain criteria, such as great wealth or business overseas in dangerous locales.
Many insurance companies offer such coverage through the business or as stand-alone policies. Kidnapping-related expenses, including hostage-negotiating fees, lost employee wages and ransom fees, consulting fees, death and dismemberment fees, personal financial losses, medical and dental costs, rest and rehabilitation, travel and accommodations, loan interest, forensic analysis, family counseling, cash benefits to victimized families and legal costs, including judgments and settlements, are usually covered under such policies.
In addition, crisis management services are often included in kidnapping policies. Insurers keep firms that specialize in crisis management on retainer. These firms are not just reactionary, rather they take a proactive approach towards the prevention of kidnappings by helping clients and risk managers avoid situations from occurring in the first place.
The premiums for these policies vary, depending upon the extent to which the policyholder is at risk. In other words, a company’s geographic location, locations of business, history — especially if kidnapping has occurred before — and revenues all are important factors in determining premiums for policies of this nature. The more attractive a company is, based on these and similar criteria, the higher the premium will be. It is important to note that, once a kidnapping insurance policy has been written, disclosure of information in any forum, public or private, regarding the existence of the policy by the insured may be grounds for rescission of the policy.
Because only 60 percent of Fortune 500 companies and far fewer smaller companies carry any kind of kidnap and ransom insurance for their employees, one insurer has now begun offering in some states kidnap and ransom insurance automatically as part of a homeowners policy at no extra charge.
Coverage applies to the insured named in the policy, family members and relatives such as children, parents, grandparents and siblings who are related to and traveling with an insured. The coverage can help pay for the reasonable costs associated with retaining a professional negotiator, security consulting, security guard services, public relations counsel, legal counsel, advertising, communications and recording equipment.
In addition, it covers travel, meals, lodging and telephone expenses incurred by the victim or his or her family; related medical, cosmetic, psychiatric and dental expenses incurred by the insured within 12 months of his or her release; and earnings lost by the victim or a family member, up to $250 a day and $10,000 in total.
Ransom payments made by the named insured, a family member or covered relative or any person acting on the behalf of an insured are not covered. Are kidnapping policies anomalies or will they become the norm? That probably depends upon the frequency with which kidnappings occur and the response that these policies receive. Given that corporate kidnappings in overseas locales and here in the United States may become more prevalent in the future, we should expect to see more of these policies written by a growing number of insurers.
If the response time to and flexibility of these claims are efficient and successful, and if corporations and families involved are not left standing with enormous bills, then the insurance benefit will be great and evidence of the usefulness of these policies will be established.
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