Crime losses can arise in different ways, and the distinction can affect which insurance policy responds.

What is employee fraud? #

Employee fraud involves dishonest conduct by an employee.

Examples can include an employee:

• Stealing money.
• Diverting payments.
• Manipulating payroll.
• Creating false suppliers.
• Misappropriating stock or property.

Crime, Fidelity or Employee Fraud Insurance can potentially respond, depending on the policy.

What is external crime? #

External crime is committed by someone outside the insured organisation.

Depending on the Crime policy, insured external events can include:

• Forgery.
• Counterfeit.
• Computer crime.
• Theft of money or securities.
• Other specified criminal acts.

What is social engineering fraud? #

Social engineering occurs where a fraudster manipulates an employee or another person into taking an action.

A common example is a fraudulent email or phone call convincing an employee to transfer money to the fraudster’s account.

Is social engineering automatically covered under Crime Insurance? #

No.

Social engineering treatment differs significantly between policies.

It may be:

• Included within a Crime policy.
• Provided by an extension.
• Sublimited.
• Covered under a Cyber policy.
• Excluded altogether.

The policy wording needs to be checked.

Why is the distinction important? #

Traditional fraud can involve a criminal directly stealing money.

Social engineering can involve an authorised employee voluntarily making the transfer because they have been deceived.

That distinction can affect how insurers classify the loss.