Wire Fraud Insurance: What You Need to Know for 2024

Wire fraud insurance has become increasingly significant in recent years. As the threat of wire fraud continues to cause substantial financial damage, more businesses are turning to wire fraud insurance to provide a crucial financial safety net and peace of mind. 

But there’s no one-size-fits-all coverage. Choosing the right wire fraud insurance means finding the right fit for your needs. 

To get an expert perspective on cyber insurance for 2024, we spoke with Jonathan Biggs, Vice President & Director of Risk Management & Education at Investors Title Insurance Company, and Chad Gaizutis, Vice President at Stateside Underwriting Agency, to break down industry policy changes and coverage updates you should know before your next renewal.

Here’s what you need to know about wire fraud and its impact today, what is and isn’t covered by standard wire fraud insurance policies today, the differences between coverage types, and what you should look for in your next wire fraud insurance policy.

In this article:

• What is wire fraud?
• What is the role of wire fraud insurance?
• Why is wire fraud insurance necessary?
• What are the different forms of wire fraud insurance?
• What should I consider when renewing my cyber insurance policy?
• What are some steps to take before my next cyber insurance renewal?
• What should I look for in my cyber insurance policy?

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In real estate, wire fraud is when a cybercriminal impersonates a trusted party in the transaction to divert funds transferred via an interbank wire to a fraudulent bank account. This often involves altering legitimate wiring instructions with fraudulent information.

Everyone in the transaction can be a target for wire fraud, from the buyer and sellers to title agents and law firms.

Wire fraud insurance — called cyber insurance — is critical in protecting your business. It’s designed to cover losses that result directly from wire fraud incidents. Coverage often includes:

1. Financial reimbursement: At its core, wire fraud insurance is used to cover funds lost due to fraudulent transfers. This can consist of money transferred under wrong pretenses or through impersonated or compromised email accounts.
2. Legal fees: Wire fraud incidents often lead to legal battles. Wire fraud insurance can cover the cost of legal advice and proceedings necessary to address the fraud.
3. Recovery and investigation costs: You often need digital experts or robust recovery measures to uncover fraudster complex and veiled tactics in a wire fraud case. This is sometimes covered by wire fraud insurance.
4. Crisis management: Some policies extend to cover crisis management services to help businesses recover from a fraud incident or restore the damage to their reputation.

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Wire fraud insurance is becoming essential as wire fraud becomes more common and sophisticated across real estate transactions. People and businesses can fall victim to these scams even with rigorous security measures. This insurance helps cover the financial losses if you’re targeted by wire fraud.

Additionally, the consequences of wire fraud often go beyond immediate financial damage; they often induce lengthy, complex recoveries, reputational damage, and a lasting emotional impact for all impacted parties. It’s a critical part of protecting yourself financially in a world where we do most of our transactions online.

Errors and Omissions (E&O) insurance, cyber liability insurance, and fidelity bonds/escrow security bonds are distinct forms of insurance that cater to different aspects of business risk.

E&O insurance, which is essential to service-providing professionals, covers legal costs and damages resulting from unintentional professional negligence, mistakes, or oversight. It’s crucial for protecting against third-party claims of negligence or inadequate work. While many consider E&O an “all-risk” policy, it does not often cover you for financial fraud. In most instances, title agents must carry E&O insurance.

Cyber liability, on the other hand, is designed to protect businesses from risks associated with electronic activities. This includes an IT system hack or a data security breach. It typically covers expenses related to compliance, investigation, and response. Title agents do not have to carry cyber liability insurance, but it's highly recommended.

Fidelity bonds, also known as escrow security bonds, are designed to protect a business from losses caused by theft, dishonesty, or fraudulent acts of its employees. This type of bond is particularly important for businesses that handle client funds or sensitive information. Fewer title agents carry this type of coverage, but it’s also recommended.

Each insurance type addresses specific vulnerabilities, ensuring a more comprehensive risk management strategy for your business. And having a good mix of coverage ensures you can keep operating for years to come — no matter the claim.

Before renewing your wire insurance policy, it’s important to have a clear conversation with your insurance agent to ensure your coverage aligns with your specific needs, especially if you’re a title agent or real estate attorney. 

Here are a few questions you should consider:

How long has my E&O carrier insured title and attorney agents? 

Ask how long their error and omissions (E&O) carrier has been insuring title and attorney agents. This gives you an idea of their experience and expertise in your field. Consider finding an E&O carrier with five or more years of experience to ensure they best understand your needs.

Does my carrier have a vested interest in my business and this industry? 

Ask if the carrier has an interest in your business and/or the wider real estate industry to determine the quality and relevance of their coverage. You’ll want coverage from someone who knows your pain points and the finer parts of how your business operates. 

Does the title underwriter endorse the carrier?

It’s important to check if the title underwriter endorses the carrier, as this can indicate reliability and trustworthiness. Did you hear about them at a trade show? Do they engage with them frequently online or across their business? Relationships are important in finding the right long-term partner to protect your business.

Concerning title agents and real estate attorneys specifically, how many businesses do you place E&O, Fidelity Bond, and Cyber Liability for? 

This question will help you gauge their experience handling risks pertinent to your profession. Consider finding an agent that places at least 25 businesses in this space.

Do I have coverage for wire fraud? 

The insurance industry does not typically cover wire fraud. Where you don’t have coverage, you need a technology partner to cover instances of wire fraud. Your carrier may discount your premium if you have a technology solution for fraud prevention.

Do I have protection against owner/seller fraud? 

Seller impersonation fraud is increasing across the industry. Like other forms of wire fraud, most policies or carriers will not cover this type of fraud. This is another instance where fraud prevention technology is important to keeping you and your customers safe.

Does my policy exclude unintentional breach of title underwriting contract? 

Ensure you understand the exclusions of your policy. Ask if any specific clauses, such as an unintentional breach of the title underwriting contract, are not covered. Knowing the exclusions helps you assess the extent of your coverage and may influence your decision on whether to renew or seek additional coverage.

These questions will help you understand your policy comprehensively and ensure your insurance protects you against the unique risks of real estate wire fraud.

Before renewing your cyber insurance, consider these four important actions.

1. Report potential issues early. If you think something might lead to a claim in the future — like a title policy claim — tell your insurance company about it now. You must also report any claims within your policy period. This helps keep your coverage up-to-date and effective.
2. Report claims quickly. If you need to make a claim, do it as soon as possible within your policy window and no later than 30 to 60 days after your policy ends. Quick reporting is important for your claim to be considered.
3. Know what your E&O covers: If there’s a problem caused by someone like an abstractor or surveyor you’ve hired, this usually falls under your Errors and Omissions (E&O) insurance, not your cyber insurance. Make sure you get your abstractor through your title underwriter.
4. Get the right bond: Make sure you have a Fidelity or Escrow Security Bond. These protect you against fraud or theft and differ from surety bonds, which are low-limit guarantees.

These steps will help ensure your wire fraud/cyber insurance is ready to protect you against online risks.

It’s important that your policy covers you for emerging threats. Pay close attention to the specific language in your policies. Look out for clauses that exclude claims related to breaches of underwriting authority in your role as a title insurance agent. These exclusions can significantly impact your coverage. 

Also, be wary of sub-limits and terms related to negligent failures in preventing dishonest conduct by non-insured parties. These details can make a big difference in how your policy responds in the event of a claim.

You should also thoroughly understand the scope of coverage for wire fraud or social engineering. Many policies offer limited coverage in this area, so ensure you know exactly what you’re protected against. The same goes for owner/seller fraud — ensure that your policy language clearly covers these risks.

The renewal season is the perfect time to clarify how wire fraud is covered under your current plan. Start by reaching out to your insurance broker to reevaluate your policies. Also, explore how technology can maximize discounts and enhance your coverage. Technology — like CertifID — can often provide better security measures, which insurance my reward with more favorable policy terms.

Another important note: As a CertifID customer, you are protected by our Tech Errors and Omissions (E&O) policy and our direct, first-party policy through Lloyd’s of London. This direct insurance policy provides access to the largest claim limits in the market ($1M per wire and $15M total aggregate coverage). For more information, review our insurance page.

Staying proactive, scrutinizing policy details, and understanding the full extent of your coverage is essential to ensure that your insurance effectively meets your needs in the evolving digital and title risks landscape. If you want to understand how CertifID can help protect your business and minimize risk, reach out.

This content was inspired by a webinar that premiered on January 10, 2023. Click here to watch a replay.

Want to know how to keep fraudsters at bay and protect your business? Attend our monthly “To Catch a Fraudster” webinar series.