Phishing Scams Leading to Losses for Policyholders
Phishing scams are on the rise, and they’re becoming more sophisticated. In 2022, Forrester predicts that 60% of security issues will result from third-party incidents, increased from 20% in 2021. This sharp increase is due in part to the fact that many companies are Outsourcing IT and other functions to third-party vendors. However, these vendors often don’t meet the same insurance requirements as the companies that hire them. As a result, if there’s a data breach or other security incident, the company is left holding the bag.
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For many companies, phishing scams have been a significant, continuous problem. Phishing coverage falls in between cyber liability insurance, which typically responds to breaches, and crime policies, which cover money stolen from companies.
Phishing attacks are kind of a gateway, because it can cause many types of cyber losses and claims,” said Gamelah Palagonia, executive vice president, cyber development, and regulatory leader with Willis Towers Watson PLC in New York. These include data breaches, forensic costs, recovery notification costs, reputational loss, ransomware, and regulatory claims.
Disputes over coverage for the scams are not uncommon. In one case, the Illinois Department of Insurance in July filed suit against Hartford Financial Services Group Inc. and Munich Reinsurance Co. is seeking recovery of $3.98 million stolen in a phishing scheme that targeted two auto insurers that are in receivership.
To protect yourself from these risks, it’s important to thoroughly vet any third-party vendor before entering into a contract. Ensuring they have adequate insurance coverage and that their employees are properly trained in cybersecurity can help reduce this type of risk.
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