The Cybercrime Financial Threats Your Clients May Be Overlooking

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Virtually every wealth management firm and brokerage has made cybersecurity a priority.

But while financial firms and advisors themselves regularly implement new software and procedures designed to safeguard client data, many advisory firm clients remain vulnerable to cybercrime and the staggering losses that can result. These losses occur because clients’ property and liability insurance, which should address many cybercrime-related losses, is very often inadequate.

(Related: On Cybersecurity, Clients Have a Lot to Learn)

Consider two recent examples of how sophisticated and devastating cybercrime can be.

A client of a financial advisor recently discovered that the smart protection/control system in his second home in Florida had been hacked. Because the home's internet-connected air conditioning system and alarms had been disabled, temperatures inside the house reached 95 degrees for days on end, ruining the client's $500,000 wine collection. Through his insurance provider, he connected with a security firm to identify vulnerabilities and tighten his cybersecurity.

In another case, after receiving an email from one of his banks notifying him of being overdrawn in an account that he believed contained around $10,000, an advisor's client checked his records. He was shocked to discover that his secretary had made several wire transfers from the account using an email address similar to his. Further investigation by the bank found that the email traffic contained the client's Social Security number and passport information because the client had applied for a visa. Identity theft services were quickly engaged to mitigate future damage to his personal identity.

In each of these cases, the clients had proper coverage and services to mitigate future damage, and their insurance providers alerted them to the risks. Unfortunately, not all clients are so fortunate. Many families are inadequately protected from the potential financial damage that cybercrime can inflict, and many insurers do little to help once a cybercrime has been committed.

Helping your clients protect themselves from these unforeseen costs and threats should be part of the comprehensive financial planning you provide. It also can pay significant dividends in client loyalty and referrals.

Policy Coverage Checklist

With almost 400,000 identity theft complaints alone reported to the government in 2016, cybercrime is a sizeable and growing threat. The following is a checklist you can review with clients to make sure their property and liability insurance will provide coverage if they are victimized by cybercrime.

  • Coverage for libel and slander, defamation of character or invasion of privacy to protect client's online activity on blogs and social media

  • Cyberbullying coverage, which can help with expenses should a serious event occur

  • Coverage for unauthorized money transfers or credit card charges

  • Coverage to restore electronic personal data and content as a result of a virus

  • Partnership with a vendor that can provide cybersecurity analysis over the phone or a more in-depth analysis in person

  • Assistance with filing a police report, creating a fraud affidavit and developing a comprehensive case file for investigative and claim-handling purposes

  • Assistance with documentation and phone calls to resolve a data breach

  • Credit and fraud monitoring

  • Assistance to help prevent identity theft at milestone life events such as marriage, the birth of children and the death of loved ones

  • Document recovery services after disasters

  • Assistance with resolved medical ID fraud, where medical records have been intertwined with another person who fraudulently used your client's health coverage

  • Emergency authentication ability and coordination with aid organizations

  • Assistance replacing lost or destroyed legal or financial documents

If you have any questions about this topic, please send email to askfran@chubb.com.

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