Why is Crime / Fidelity insurance important?

​Crime and Fidelity insurance is crucial for organizations because it protects against financial losses resulting from dishonest acts such as employee theft, fraud, forgery, or embezzlement. This coverage helps mitigate first-party exposures, where the organization suffers a direct loss due to internal misconduct. It also addresses third-party exposures, such as losses a client incurs due to the dishonest actions of the organization’s employees, for which the organization could be held liable. In today's business environment, where financial transactions and sensitive data are often handled electronically, the risk of internal and external fraud is higher than ever. Having Crime and Fidelity insurance in place ensures business continuity and preserves trust with clients, investors, and stakeholders.

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Coverage May Include: Computer Fraud and Transfer

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• Computer Fraud insurance protects organizations from losses caused by unauthorized access to their computer systems, where hackers manipulate or steal funds or data. This coverage applies when criminals use cyberattacks or malware to gain control of financial accounts or sensitive information.

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• Transfer Fraud insurance protects an organization if it suffers a financial loss because a bank or financial institution transfers money or securities based on a fraudulent or unauthorized instruction. This can include situations where criminals send fake wire transfer requests, altered payment orders, or impersonate trusted parties to trick the institution into moving funds incorrectly. The key is that the loss occurs because the financial institution follows these fraudulent instructions.

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Coverage May Include: Social Engineering

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Social Engineering insurance provides coverage for financial losses resulting from deceptive schemes where criminals manipulate employees into voluntarily transferring money or sensitive information. These attacks often come in the form of phishing emails, phone calls, or fake invoices that appear to come from trusted sources like executives, vendors, or clients. Traditional crime insurance policies may not cover these types of losses because the transfer is “voluntary,” even if it was fraudulently induced. Social Engineering coverage fills this gap, helping organizations recover from increasingly common and sophisticated cyber-enabled fraud.

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Coverage May Include: Employee Retirement Income Security Act (ERISA)

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The Employee Retirement Income Security Act (ERISA) is a federal law that sets standards for private-sector employee benefit plans, including retirement and health plans, to protect plan participants and their beneficiaries. ERISA requires that plan fiduciaries act in the best interests of participants and follow strict duties of loyalty and prudence. One key insurance requirement under ERISA is that fiduciaries handling plan assets must be covered by a fidelity bond, which protects the plan against losses due to fraud or dishonesty. This bond must generally be at least 10% of plan assets, up to a maximum of $500,000 (or $1 million if the plan holds employer securities). Unlike other types of insurance, this bond is meant to protect the plan, not the fiduciary.

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Claims Example:

A company received an urgent email that appeared to be from one of its trusted customers, requesting an immediate payment for an outstanding invoice in the amount of $93,750. Believing the email was legitimate, the company’s finance team processed a large wire transfer to the provided bank account. Later, it was discovered that the email was a sophisticated fake, sent by cybercriminals using a hacked account, and the funds were irretrievably lost. This type of loss would typically be covered under a Transfer Fraud or Social Engineering insurance policy.