CEO fraud, invoice fraud, cyber fraud: these days, more and more firms are confronted by these forms of crime. Although they are very well aware of the increasing risk, the phenomenon of 'fraud' – and therefore also fraud insurance – remains taboo for many of them.
Maybe this is important to know: contrary to popular belief, fraud is insurable. What’s more: this type of insurance is a very useful addition to your firm’s fraud prevention plans.
But what exactly is fraud insurance? And are there other insurance solutions for matters relating (partly) to fraud?
Fraud is a collective term for all kinds of criminal offences such as dishonesty, forgery, theft, embezzlement, scams, computer fraud and other acts of bad faith.
A recent study conducted by the BDO consultancy firm indicates that firms can be confronted by a whole range of types of fraud:
Fraud insurance offers firms protection against (direct) financial damage resulting from fraud committed by third parties and/or their own staff. In fact, BDO’s study indicates that no less than 37% of all fraud attempts originate with employees within the firm.
We are often asked whether fraud is also covered by property insurance. It is true that fraud insurance and property insurance both come under the umbrella of theft, but the property policy will include various qualifications.
For example, digital theft (cyber theft, telephone hacking, cyber suppression, etc.) is always excluded. Some form of break-in, burglary, violence, threat or use of false keys must be established. If the fraud is committed by an in-house employee, this will usually not be the case, as the employee is already ‘within the protected walls’.
Finally, the property policy often includes a modified exemption or a sub-limit. We therefore advise you to take out a supplementary fraud policy in addition to your property insurance.
Fraud insurance and cyber insurance are also regularly confused with one another. It is true that both policies overlap, especially for damages resulting from cyber crime. Yet there are clear differences between the two insurance solutions.
For example, it is extremely difficult to insure CEO or invoice fraud in a cyber policy. This type of fraud can only be insured under cyber insurance if a digital break-in is involved. If this is not the case, only fraud insurance can provide a solution.
Unfortunately, however, there are currently few, if any, combined solutions that protect against both cyber and fraud risks. Parties that do offer these solutions apply selective sub-limits. For the time being, therefore, there is no ideal solution available.
We therefore recommend that you take out both a cyber and a fraud policy. This way you are fully covered for the actual risks that both cyber and fraud currently present.