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Article | FINEX Observer

FINEX Observer: Fidelity year in review

Fidelity and crime

Financial, Executive and Professional Risks (FINEX)

December 15, 2020

More of the same in 2021 - a hard market impacts the fidelity and crime spaces.

“Opportunistic” is the word that feels most fitting to describe what we’ve seen from the underwriting community in 2020. The hard market is impacting the fidelity and crime (hereafter referred to as “crime”) spaces, but to a significantly lesser extent than the management liability space. In many cases, the rates sought on crime renewals is supporting the broader financial and executive books of business largely.

Crime underwriters are primarily citing:

  1. market conditions,
  2. frequency of social engineering losses and
  3. concerns due to the continued remote work environment, as reasons for seeking rate increases.

Although social engineering fraud has been around for several years, only recently has it received the attention we believe it deserves. Losses are frequent and, often severe, attracting increasing levels of media and risk manager attention. Please see our article on social engineering trends and insights for additional insight.

In 2020, we saw a newer spin on social engineering fraud gain traction. This fraudulent scheme, involving 401(k) accounts, is facilitated when the bad actor fraudulently accesses employee/retiree plan account information and uses that information to initiate a withdrawal from a 401(k) account. Our article on 401(k) fraud provides additional insight. In 2020, we also saw an evolution of cases involving employee theft. Please see our recap of developments in fidelity coverage litigation in 2020.

In what predominantly remains a remote work environment across the globe, it is recommended that employers and employees continue to be vigilant to threats from both inside and outside their organizations. The COVID-19 pandemic has been used in a variety of methods as part of malicious cybercriminal operations. Increases in computer hacking and social engineering fraud resulting from remote working continues to present a security threat to businesses of all sizes. Throughout the pandemic, government agencies including the FBI and the Cybersecurity & Infrastructure Security Agency have published important alerts and valuable corresponding guidelines to help organizations prevent or mitigate the risks from malicious cybercriminal activity related to COVID-19.

2021 – What to Expect

Similarly to 2020, in 2021, we expect to see crime renewals follow the lead of financial and executive lines more broadly. Barring any material changes in exposure, most organizations should expect 5% to 10% increases on renewals, with higher increases on small to mid-sized accounts as well as on accounts in more challenging classes of business.

Concerns over cyber aggregation and social engineering exposures are anticipated to lead coverage discussions in 2021. Crime coverages, namely extortion and data restoration, that may overlap with cyber coverages are being closely evaluated by insurers. We expect to see a continued push to delete or exclude these coverages from crime policies as means to direct these exposures to cyber policies, which insurers feel is best suited to respond. Willis Towers Watson remains focused on coordinating cyber and crime policies, addressing both gaps and overlaps in coverage.

Social engineering losses are expected to continue to be a frequent source of loss in 2021. While courts remain divided as they interpret how crime policies respond to impersonation fraud, Willis Towers Watson undoubtedly recommends purchasing an explicit social engineering coverage grant. Insurers will be laser focused on monitoring social engineering limits, ensuring deductibles are adequate, underwriting to the highest standards and displaying conservative appetites to offer higher social engineering limits, particularly limits responding to unauthenticated transfers.

From a claims trends perspective, the average cost of internal theft and fraud will likely continue to exceed the average cost of external events, due to the duration of the occurrence. Please see our article which examines why the average loss reported under crime insurance nearly doubles when there is employee involvement. We believe the frequency of external theft and fraud will continue to surpass internal fraud losses, primarily driven by social engineering fraud. To bypass the robust technological defenses put in place by many corporations, the perpetrators use sophisticated techniques to exploit trusting and vulnerable human behaviors as means to induce employees to divert assets. The key to preventing and/or minimizing social engineering losses is to ensure adequate verification controls (i.e. call-backs) and procedures are in place and are followed, without exceptions.

Developments in crime litigation are meaningful to the evolution of the product. A named peril form continues to be widely supported and with this format, policies are fact specific. As perpetrators deploy highly sophisticated schemes against their targets, new claims scenarios arise which test policy wording and shape the future of the crime landscape. We continue to monitor claim trends and challenge the marketplace to offer the most favorable terms and conditions for our clients.


This Willis Towers Watson publication is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. If you would like additional information, please contact us. Some of the information in this publication may be compiled by third party sources, whilst we consider these to be reliable, we do not guarantee and are not responsible for the accuracy of such. The views expressed herein are not necessarily those of Willis Towers Watson. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates, for example: Willis Towers Watson Northeast, Inc. in the United States, Willis Canada Inc., in Canada.


US Fidelity Thought Leader, FINEX North America

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