Cyber Crime Endorsement
An endorsement extending crime policy coverage to include cyber-related theft and fraud including phishing, social engineering, and computer fraud.
What It Is
A Cyber Crime Endorsement extends a traditional commercial crime policy to cover losses from cyber-enabled fraud and theft. This includes social engineering fraud (business email compromise), phishing-induced wire transfers, computer fraud involving unauthorized access to the insured's systems, and other technology-facilitated criminal acts.
The endorsement bridges the gap between traditional crime coverage (which focuses on employee dishonesty and physical theft) and cyber liability coverage (which focuses on data breaches and network security failures). Many cyber-enabled theft losses fall between these two policies without the cyber crime endorsement.
Sublimits for cyber crime endorsements are common, typically ranging from $100,000 to $500,000, which may be inadequate for businesses handling large wire transfers or financial transactions.
Why It Matters for Brokers
Cyber-enabled fraud is now the most common type of financial crime targeting businesses. Business email compromise alone caused over $2.7 billion in losses in the most recent FBI Internet Crime Report. Standard crime policies may not cover these losses without a specific cyber crime endorsement. Brokers must verify whether their clients' crime policies include cyber crime coverage and whether the sublimits are adequate for the client's transaction sizes. Coordinating cyber crime coverage between the crime policy and cyber liability policy is a critical coverage design skill.
Real-World Example
A company's controller receives an email that appears to be from the CEO, instructing an immediate wire transfer of $175,000 to a vendor. The controller processes the transfer, which goes to a fraudulent account. The standard crime policy's computer fraud coverage does not apply because the controller voluntarily initiated the transfer. The cyber crime endorsement (social engineering fraud) covers the $175,000 loss minus a $10,000 deductible.
Common Mistakes
- 1Assuming social engineering fraud is covered under standard crime policy computer fraud provisions, when it typically requires a specific endorsement.
- 2Not comparing cyber crime sublimits against the client's typical transaction sizes to ensure adequate coverage.
- 3Failing to verify whether social engineering fraud is covered under the crime policy, the cyber policy, or both — and whether overlapping coverage creates gaps.
How brokerageaudit.com Handles This
Policy Checker identifies crime policies and evaluates whether cyber crime endorsements are in force, comparing sublimits against the insured's transaction sizes and flagging potential gaps between crime and cyber coverage.