Cyber liability covers data breaches and ransomware. It often doesn't cover the loss when someone is tricked into wiring money to a fraudulent account — and that's where business email compromise claims go to die.
Your client's cyber liability policy covers data breaches, ransomware recovery, and network outages. What it often does not cover — or covers with a much lower sub-limit — is the loss that happens when someone inside the company is tricked into sending money.
What Social Engineering Coverage Addresses
Business email compromise works by convincing an employee to initiate a wire transfer or update a vendor's payment account. The instructions look legitimate — they appear to come from an executive, a vendor, or a client. The money moves. Then the fraud is discovered.
Standard cyber policies often treat this as a crime loss rather than a cyber loss. Standard crime policies may treat it as a voluntary transfer rather than a theft. The gap between those two definitions is where claims get denied.
Social engineering coverage — also called funds transfer fraud or a cyber fraud endorsement — is designed specifically for losses caused by deceptive instructions that result in fraudulent but voluntary transfers.
Who Is Exposed
Any business that initiates wire transfers, pays vendors electronically, or has employees with authority to move money carries this exposure. That covers most commercial clients.
The loss doesn't need to be enormous to be significant. A single fraudulent wire to a fake vendor account — especially one discovered days after the fact when the funds are long gone — can represent a serious hit for a small or mid-size business with no coverage waiting for it.
What to Check on Renewal
Ask clients who initiate electronic payments two things: does their cyber policy include social engineering coverage, and if so, what is the sub-limit?
Many policies include the endorsement but cap it at a fraction of the underlying policy limit. If a client regularly initiates large wire transfers, the sub-limit — not the policy limit — is the number that matters. Finding out after a loss that coverage falls well short of the actual transfer amount is the conversation no one wants to have.