Pension plan fraud is increasing and becoming a more prevalent cyber crime. A typical example occurs when a perpetrator fraudulently impersonates a pension plan participant to obtain their retirement funds.
The Pension Fraud policy, created by Willis Towers Watson and underwritten by an AM Best rated A++ insurance company, was designed specifically to cover these losses. Furthermore, there is significant flexibility with the product to control premium costs. Key highlights about the program include the following:
- Policy – covers loss of funds sustained by a plan participant of the insured’s 401(k) plan as a direct result of the fraudulent impersonation of the plan participant. Policy applies to fraudulent instructions received by the plan administrator of the insured.
- Limit of Liability – applies to each individual plan participant’s account in the insured’s 401(k) plan. The policy affords an each and every loss limit with no annual aggregate limit. Single Loss Limits run from $100,000 to $500,000 per plan participant.
- Deductible – the policy does not have a deductible and pays first dollar of any covered loss.
- Cost – the premium is based on the number of plan participants and the policy limit selected. (For insured’s having a higher risk appetite, the policy can be written with an aggregate deductible, which is reduced by each loss otherwise covered loss under the policy; significantly reducing the policy premium). The policy has a minimum premium of $200,000, regardless of limit or number of plan participants.
- Difference In Condition (DIC) Policy Option – some outside plan administrators have a fraud policy in place, but some clients have expressed serious concerns about the high number of warranties found in these policies and have elected to purchase the Willis Towers Watson contract negotiated with the market on a DIC basis, which has far fewer warranties and can be purchased at a significantly lower premium.
- Underwriting data – underwriter requires a completed application and the total number of plan participants, broken down by account balances, in $50,000 increments (e.g. $50,000, $100,000, $150,000, etc.).
