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Fraud & Cyber Security | 3 min read

Common Retail Insurance Claims and How to Avoid Them

Retail business owners often operate on tight margins, and challenges like shoplifting, employee theft, weather and fire damage, and cybersecurity breaches can significantly impact their bottom lines. In this blog post, we’ll highlight some of the most common insurance claims filed by retail and restaurant owners, and how you can avoid them.

Retail Theft and Shoplifting

Retail shrinkage refers to the loss of inventory due to factors such as employee theft, shoplifting, cashier error, and vendor fraud. Data from the National Retail Federation (NRF) reveals that, in 2019, industry security executives saw an increase in shoplifting, employee theft, and organized retail crime. These losses totaled $61.7 billion in 2019, up from $50.6 billion in 2018.

According to the NRF’s VP of Research Development, Mark Mathews, “Between an increase in incidents and new ways to steal, shrink is at an all-time high. Loss prevention experts are facing unprecedented challenges from individual shoplifters to organized gangs to highly skilled cybercriminals. Retailers are responding with both traditional methods and the latest technology, but this is an ongoing challenge.”

Related Reading: 4 Ways to Minimize Employee Fraud and Theft

While your company may not be able to avert all incidents of theft, there are steps you can take to help minimize your risk.

  • Install or improve outdoor lighting to deter nighttime theft. Consider installing alarms, security systems, and cameras.
  • Implement a retail inventory control program and carefully inventory the merchandise you receive to quickly identify missing items.
  • Place high-value items like expensive jewelry and perfume behind the counter.
  • Make sure you have enough employees on staff. This makes it more difficult for shoplifters to steal items when no one is watching.
  • Limit the number of employees who have access to your keys, storefront, storage room, and other areas where you keep merchandise.
  • Set security cameras to monitor storage areas and the cash register to monitor both employee and customer activity.

Weather and Fire Damage

According to the National Fire Prevention Association, “U.S. fire departments responded to an estimated average of 13,570 structure fires in stores and other mercantile properties per year, which accounts for 3% of all structure fires.”

Retail operators who own or lease space for their business risk having the building and their inventory damaged by severe weather or fire. Here are some tips to avoid having to file an insurance claim due to fire or severe weather:

  • Conduct regular property inspections, including the electrical system.
  • Keep up with all regularly scheduled and required maintenance.
  • Winterize the building so freezing pipes don’t burst during colder weather.
  • If a hurricane, tornado, hail, fire, or other severe weather event is expected in your area, be prepared. Have an emergency plan and take precautions to minimize damage.
  • Keep your inventory in a safe place. Store it off the ground so it won’t be as susceptible to flooding.
  • Ensure all fire alarms are working properly and that you have fire extinguishers on-site.

Cybersecurity Breaches

Digitization was already a major component of our lives before COVID-19 hit in 2020, but the global pandemic increased rates of digital adoption across the board. Retail businesses that might not have leaned as heavily on technology pre-pandemic are doing so now.

For example, the trend of buy-online-pickup-in-store, or BOPIS, picked up momentum in response to pandemic shutdowns but is now a shopping staple. According to a recent study, 65% of retail businesses now offer either curbside pickup or BOPIS options, compared to 52% in 2019.

From an insurance perspective, this increased reliance on technology among retailers comes with greater and more complex risk, particularly in the area of cybersecurity and data protection. Many retail business owners who haven’t needed cyber liability insurance in the past may need to consider obtaining a policy.

Cybersecurity Checklist 2021

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Fraud & Cyber Security

Gina Wallisa

Gina Wallisa is a Commercial Lines Producer with SWBC Insurance Services. She is dedicated to helping her clients mitigate risk by offering a wide range of comprehensive insurance solutions. Gina has an extensive background of 30+ years in the insurance industry with roles ranging from underwriting and marketing to program management. Her expertise is in the Restaurant & Hospitality Industry and she is focused on providing business owners with viable, individually tailored insurance options designed to fit their needs, budget, and risk tolerance. Gina is an officer on the Board of the Greater Austin Restaurant Association. She is an advocate for restaurant operators and works hard to bring their issues to the forefront of the insurance industry.

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