Kidnap And Ransom Insurance: Legalized Protection Racket?

Even though it is already freely advertized on-line and many insurance companies provide such policies, but is kidnap and ransom insurance nothing more than a “legalized protection racket”?

By: Ringo Bones

One of the fundamentals that had been laid out by the increasingly globalized insurance business since its establishment was that the first essential factor in insurance is that the element of gambling must not be present. But what if a certain insurance policy involves a sort of tacit contract of indemnity between the insurance company and the criminals doing the criminal act that needs to be insured? Does this make the supposedly “legitimate” insurance company now involved in the complicity of a criminal act? Have you ever checked out some of the policies defining these so-called kidnap and ransom insurance?

A lot of insurance companies plying their “kidnap and ransom insurance” wares on-line seem to have reach a salient consensus in their policies’ themes. Some extolling that kidnap, ransom and extortion insurance should form a part of contingency planning or risk management for any international company whose personnel work in emerging markets designated as “high-risk” as defined by the US State Department or other related global security watchdogs. According to insurance companies selling kidnap, ransom and extortion insurance, “Your employees may be seen as legitimate targets for kidnap and ransom demands”. But what if there’s some kind of collusion between the kidnap and ransom insurance providers and the actual criminals doing the actual kidnapping, abduction, extortion and what have you? Does this mean that we’re screwed?

If anyone out there with concerns like mine, they are totally warranted because of the very definition a typical kidnap for ransom insurance policy is often executed. Like one of the most valuable services that a kidnap and ransom policy can offer is the provision of a crisis management team to handle negotiations and assist with all activities involved in a kidnapping case. So what if the highly trained kidnap and ransom responders are just complicit with the actual criminals doing the actual abduction?

And wait till you hear the “confidentiality clause” about how kidnap, ransom and extortion insurance providers operate a strict policy of non-disclosure of client details. Does this mean there’s also a non-disclosure agreement between complicity of the kidnap and ransom insurance provider and the actual criminals doing the actual kidnapping and extortion?

Unlike insurance companies that issue fire insurance that support the Underwriters’ Laboratories or similar organizations involved in research and other activities actually doing something to reduce fire losses and spur fire prevention, insurance companies that issue kidnap, ransom and extortion insurance don’t seem to be supporting the local law enforcement agencies of the supposedly high-risk countries that their policy holders work. And there’s that moral hazard that it just seems too tempting – not to mention all to easy – for the insurance companies that issue kidnap, ransom and extortion insurance policies to just be complicit with the local criminal elements in order to stealthily fleece their clients with the law enforcement groups concerned being none the wiser.

So is the kidnap and extortion / ransom insurance nothing more than a legalize protection racket? Well, most of them probably provide an honest service but it is all too easy to turn a typical kidnap and ransom insurance clause into a fraudulent scheme, enterprise or even a criminal activity for profit. Given that if these kidnap, ransom and extortion responders employed by the insurance companies that issue kidnap and ransom insurance do the actual groundwork of actually doing old-fashioned legwork in order to identify the rigmaroles of the local kidnap for ransom enterprise of these high-risk business destinations, does this mean that abduction risk will be further minimized making such kidnap for ransom insurance policies just seem so unnecessary?