The staggering increase in frequency and losses highlights the importance of social engineering training for companies and their employees. In addition, the proper endorsements on cyber insurance policies can mean the difference between coverage and no coverage.

While many risk managers feel confident they have these threats quarantined with virus protection or other tactics, social engineering hacks can bypass standard protection and other systems by communicating directly with unsuspecting employees. A skilled social engineering hacker can fool even the most sophisticated employee. It is important for corporate risk managers to understand the breadth and depth of these escalating threats.

Payroll fraud transfers are another type of BEC scam. Hackers seek logins for payroll processing systems and divert money to other accounts. The most affected sectors have been education, healthcare, and commercial air transportation—but, as CNBC recently reported, all types of businesses are potential targets for payroll fraud.

Adding social engineering and invoice manipulation fraud coverage to cyber policies can help provide coverage when a threat strikes. Social engineering coverage can apply when a misled employee initiates a transfer based on written or verbal communications received from a bad actor posing as a customer or a vendor.

Invoice manipulation fraud coverage can cover losses experienced by the company's clients or vendors if its employees initiate a transfer of funds to a hacker based on fraudulent instructions received following a compromise of the company's email system. The instructions look legitimate because the company's actual email system sends the instructions. The receiver, not realizing the account has been compromised, is an easy target because they are expecting the invoice. 

These social engineering risks are on the rise across the globe. An experienced wholesaler who understands the exposures and coverage limitations can help you recommend the appropriate coverages to your insured. 

Matt Donovan ([email protected]) is an assistant vice president and professional lines broker with Worldwide Facilities, a national wholesale insurance broker, managing general agent and program underwriter.

This article first appeared on Worldwide Facilities' website and is republished here with the author's consent.