Computer Fraud and Funds Transfer Fraud:

Two Overlooked Coverages Every Firm Needs

Joe Haggerty, CPCU, ARM, CIC, Vice President and Commercial Marketing Manager, Univest Insurance, Inc.

Traditional crime insurance was designed to protect insured companies (insureds) from sources of loss such as employee dishonesty, forgery or alteration, or theft of money and securities. All of these causes of loss deal with the physical theft of company funds or the physical forgery or alteration of company documents to steal company funds. These causes of loss do not provide coverage for losses resulting from the fraudulent use of a computer to transfer funds or for losses in which a financial institution receives fraudulent instructions directing them to transfer, pay or deliver funds.

This represents a major coverage gap in the insurance programs of many commercial insureds. A 2008 survey done by the Computer Security Institute found that the most expensive computer security incidents involved financial fraud with an average reported cost of $500,000. The survey found that the average loss suffered due to computer fraud was $289,000. An uninsured loss of this magnitude could be devastating for small- to medium-size firms.

Fortunately, in recent years additional insuring agreements have become available for inclusion in the commercial crime policy to address these exposures. In addition to the standard crime coverages, prudent business owners should also seriously consider purchasing Computer Fraud Coverage and Funds Transfer Fraud Coverage.

Computer Fraud Coverage covers the use of a computer to cause a fraudulent transfer of covered property (usually money or securities). Coverage applies when a non-employee, using his or her own computer, gains access to the insured's computer system and, for example, transfers funds to his or her own account or directs shipments of property to unauthorized accounts.

Funds Transfer Fraud covers the loss of money and securities from the insured's account at a financial institution due to fraudulent instructions. Losses resulting from the use of a computer to transfer money or securities fraudulently are excluded. Therefore, most insureds that purchase funds transfer fraud coverage should also purchase computer fraud coverage to avoid a coverage gap.

Please contact a Univest Insurance, Inc. representative at 800-220-3077 to set up an appointment to review your existing coverage and to discuss your firm's need for Computer Fraud and Funds Transfer Fraud Insurance.

Insurance products are offered through Univest Insurance, Inc. and are obligations of the issuing insurance companies, are not obligations or deposits of or guaranteed by any bank and are not insured by the FDIC or any other agency of the United States. Insurance products are not a condition to any bank loan, product or service. Univest Insurance, Inc. is a licensed subsidiary of Univest Corporation.


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