Fraud has been around for thousands of years, probably since the existence of man. As technology continues to advance, thieves are adapting as well. The FBI has identified more than 14,000 U.S. companies that have been plagued by social engineering fraud. This type of attack is on the rise – since January of 2015 incidents have increased more than 1300%.
Thieves use social engineering fraud to attack businesses that send wire transfers on a fairly regular basis, typically targeting CFOs and controllers who pay the bills. The fraudsters will hack into an email server to see who requests these wires and the type of wording they use. They then use this information to impersonate those people sending emails with the exact same wording, vendor name and email signature, but with one key difference – the account number for the wire transfer. Since it is not uncommon for a request like this to come through, the employee at the targeted business unknowingly sends these fraudulent wire instructions to the bank resulting in thousands of dollars being sent to a thief.
By the time the theft is discovered it is usually too late to recover the funds so most businesses turn to their insurance advisor to be reimbursed for the mistake. However, to their dismay, crime policies are not designed to cover these types of social engineering scams. A business might turn to their cyber liability policy only to learn that social engineering is not covered there either. The majority of crime and cyber liability policies exclude losses for voluntarily complying with fraudulent instruction to transfer, pay or deliver funds so additional coverage is needed to protect your business. There are several insurance carriers that offer products specifically tailored to cover losses resulting from Social Engineering Fraud.
Even if you have every protective safeguard in place to make sure this doesn’t happen to you, it is still important to have this coverage. It is no different than insuring your building for fire. You hope it never happens and you do everything you can to prevent it (alarms, sprinkler system etc.), but you still purchase insurance just in case.
If you are unsure if you have this coverage please don’t hesitate to contact Univest Insurance at 800-220-3077 to discuss this ever-increasing risk. Small to midsize companies are the most vulnerable because they may not have the cash reserves to absorb a six figure loss that is uninsured. While covering this exposure may be an added expense, it is a wise investment when it comes to protecting your business assets.
Insurance products offered through Univest Insurance, Inc. are obligations of the issuing insurance companies, not obligations or deposits of or guaranteed by any bank and are not insured by the FDIC or any other agency of the United States.