Beazley has a new coverage endorsement addressing fraud that happens when a company is convinced to transfer funds to an outside party due to criminal impersonation.
The specialist insurer said the new endorsement—fraudulent instruction service—will have a limit of up to $250,000. It’s designed to address losses stemming from transfer of funds as a result of fraudulent instructions from a person claiming to be a vendor, client or authorized employee.
Beazley’s target audience: clients who carry its commercial crime policy. The endorsement is also meant to go beyond traditional computer fraud insurance, which may not cover an incident where an employee voluntarily transfers funds, even if it stems from fraud.
Bill Jennings, head of the financial fidelity/commercial crime unit for Beazley in New York, said that fraud instruction scams have become so sophisticated that any business involved in transferring funds is vulnerable.
“Fraudsters rely on human error—a person not noticing that one character is wrong in an email. They rely on a subordinate’s eagerness to please and be responsive to a superior,” Jennings explained in prepared remarks. “These and other factors create scenarios for lost funds that are impossible to get back, especially if they leave the United States.”
He added that this phenomenon reflects the evolution of the old “Nigerian prince scam” emails aimed at consumers.
“Simply put, the Nigerian prince scam aimed at consumers is now flourishing in the business-to-business world,” Jennings said.
Beazley cites a number of incidents that have occurred in recent months. Among them: A person pretending to represent a vendor in China that provides parts to a manufacturer in the Midwest convinced the manufacturer that the vendor had changed its bank wiring instructions. The company followed the instructions but didn’t realize the fraud took place until the actual vendor asked for payment for parts that were never paid for, Beazley said.