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Survey Report

Insurance Marketplace Realities 2020 – Fidelity/Crime

Financial, Executive and Professional Risks (FINEX)
N/A

November 13, 2019

Fraud is still on the rise. Cyber criminals are becoming more sophisticated and continue to prey on trusting or careless employees to access company assets and data.
Rate predictions
  Trend Range
Fidelity/Crime Neutral increase (yellow line with purple triangle pointing up) Flat to 5%

Key takeaway

Fraud is still on the rise. Cyber criminals are becoming more sophisticated and continue to prey on trusting or careless employees to access company assets and data.

The 2019 AFP Payments Fraud and Control Survey Report showed that 82% of companies were targets of payments fraud last year. The survey also revealed that in 2018:
  • 80% of organizations experienced business email compromise (BEC)
  • 54% of organizations reported financial losses as a result of BEC
  • 70% of BEC scams targeted checks, followed by wires at 43%

It isn't enough to educate your employees.

  • A company culture allowing for employees to trust their instincts and ask questions is key.
  • In addition, a recent report sponsored by CyberScout recommends organizations take the following actions:
    • Remind employees to "think before you click" and only log in to secure websites.
    • Run company-wide phishing drills.
    • Use two-factor authentication when possible.
    • Make it easier to report suspicious emails.
While cybercrime becomes more and more prevalent, employee dishonesty remains the number one cause of loss to organizations.
  • Internal fraud perpetrators have the inside knowledge to avoid detection, allowing their theft to continue for longer periods of time, thereby increasing the size of the loss.
We continue to see the potential for the intersection of coverage between fidelity/crime policies and other (cyber, K&R,) policies.
  • Organizations are looking to their brokers to evaluate their exposure and determine which policies are most likely to respond.
  • Carriers are starting to impose restrictive language to specify which policy should respond.
    • For losses involving funds or tangible property, insureds should look first to their fidelity/crime policy.
    • For losses involving theft or loss of intangible assets, such as data, insureds should look first to their cyber policy.
    • For ransomware attacks and the like, a K&R (special crime) policy may provide some coverage as well. (See our section on Special Contingency Risks/Kidnap & Ransom for developments in this line of coverage.)
Buyers need to be careful about exposures to cryptocurrency and other digital assets.
  • Traditional policy wording may not be adequate.
  • Markets offering coverage present unique challenges and demand vigorous underwriting.
U.S.-domiciled commercial risks that are placed in the London market are experiencing more challenging renewals as a result of a decrease in capacity.
  • This has led to significant increases in retention levels coupled with increases in premium that are beyond the percentages we are experiencing in the domestic market.
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