In today’s digital economy, cyber risk is no longer confined to technology companies. Every business, no matter the industry, relies on email, online banking, and digital communication. These everyday tools have become prime targets for cybercriminals, and one of the most damaging tactics they use is social engineering fraud.
Yet many businesses still believe cyber insurance isn’t relevant to them. “We’re not a tech company,” they say. “We don’t store sensitive data.” Unfortunately, this misconception leaves them exposed to one of the fastest-growing threats in the corporate world.
What Is Social Engineering Fraud?
DEFINITION:
Social engineering fraud is a type of cybercrime that uses psychological manipulation to trick people into divulging sensitive information or transferring money.
Social engineering fraud occurs when criminals manipulate employees into transferring funds or disclosing confidential information. Unlike traditional hacking, these attacks exploit human trust rather than technical vulnerabilities. Common examples include:
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CEO Impersonation: Fraudsters pose as a senior executive and instruct staff to urgently transfer funds.
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Vendor Email Compromise: Criminals hack or impersonate a supplier’s email and send fake invoices with altered bank details.
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Business Email Compromise (BEC): Attackers infiltrate email systems or mimic legitimate addresses to redirect payments.
These scams are sophisticated, convincing, and often bypass traditional security measures. The result? Businesses unknowingly send large payments to fraudulent accounts—and the money is gone.
“We’re Not a Tech Company”
Many clients assume cyber insurance is only for businesses that handle sensitive customer data or run complex IT systems. But consider this: if your company uses email and makes electronic payments, you are a target.
Cybercriminals don’t discriminate based on industry. They look for opportunity—and social engineering provides exactly that.
Any business can be a victim of social engineering fraud
Even businesses with minimal online presence can suffer catastrophic losses simply because they use email or pay invoices electronically.
Losing $100k in seconds
Imagine this scenario: Your accounts team receives an email from what appears to be your CEO. The tone is urgent: “We’re finalizing a major acquisition. Please transfer $100,000 to this account immediately.”
The email looks authentic: correct signature, company logo, even the CEO’s writing style. Under pressure, the payment is made.
Hours later, you discover the email was fake. The money has gone offshore, and recovery is virtually impossible.
Or consider a supplier relationship: You receive an invoice from a trusted vendor, but the bank details have been changed. You pay $100,000 to the new account, only to learn weeks later that the vendor never received the funds. Again, the money is gone.
These are not hypothetical examples. They happen every day.
Scammers stole more than $152.6 million from Australians using BEC attacks in 2024. This was an increase of 66 per cent from 2023. This puts BEC scams among the top three self-reported cybercrimes for business in Australia.
— Australian Federal Police, ReportCyber
Why Traditional Insurance Won’t Cover This
Many businesses assume their crime or professional indemnity policy will respond.
Most policies do not cover Social Engineering attacks
Most traditional policies exclude losses caused by voluntary transfers even if those transfers were induced by fraud.
That’s where cyber insurance with social engineering fraud cover becomes critical. This specialized coverage is designed to protect businesses against financial losses resulting from impersonation, fraudulent instructions, and other social engineering tactics.
What Does Social Engineering Cover Include?
A robust cyber policy with social engineering protection typically covers:
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Financial Losses: Reimbursement for funds lost due to fraudulent payment instructions.
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Legal and Forensic Costs: Assistance in investigating the fraud and mitigating further risk.
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Notification and Crisis Management: Support for communicating with stakeholders and restoring trust.
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Optional Enhancements: Some policies include training and risk management tools to help prevent future attacks.
The Business Case for Cyber Insurance
Cyber insurance is no longer optional—it’s a business necessity. Here’s why:
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Attacks Are Increasing: Social engineering fraud is one of the fastest-growing cyber threats worldwide.
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Losses Are Significant: A single incident can cost hundreds of thousands of dollars, often unrecoverable.
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Every Business is Vulnerable: If you use email and make electronic payments, you’re at risk.
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Affordable Protection: Compared to the potential loss, premiums for cyber insurance are modest.
How to Protect Your Business
While insurance can help mitigate financial losses, prevention is always the best defense. Implementing strong internal controls and awareness programs can significantly reduce your risk. Here are some best practices:
Employee Training
Your staff is the first line of defense. Fraudsters often impersonate executives, suppliers, or clients to trick employees into transferring funds or sharing sensitive information.
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Conduct regular training sessions on common fraud tactics such as phishing, CEO fraud, and invoice scams.
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Teach employees to verify payment instructions through a secondary channel—such as a phone call to a known contact—before processing any transfer.
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Encourage a culture of skepticism: if something feels urgent or unusual, it should be double-checked.
Multi-Factor Authentication (MFA)
Email accounts are a prime target for attackers because they often contain sensitive financial and operational information.
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Implement MFA for all email and financial systems to add an extra layer of security beyond passwords.
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Ensure employees understand why MFA matters and how to use it effectively.
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Regularly review access permissions and revoke accounts that are no longer needed.
Vendor Verification
Fraudsters frequently pose as legitimate suppliers and request changes to bank details.
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Establish a formal process for verifying any changes to vendor payment information.
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Require confirmation through a trusted channel (e.g., a phone call to a verified number) before updating records.
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Keep a secure, centralized list of approved vendor contacts and bank details.
Incident Response Plan
Even with strong controls, no system is foolproof. A clear response plan can minimize damage if fraud occurs.
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Define roles and responsibilities for reporting and investigating suspected fraud.
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Include steps for isolating affected systems, notifying banks, and contacting law enforcement.
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Test the plan periodically through tabletop exercises to ensure everyone knows what to do under pressure.
These initiatives will help prevent incidents from occurring and they will also lower your premiums.
Final Word
Cybercrime is evolving, and social engineering fraud is one of its most insidious forms. It doesn’t require hacking firewalls or stealing data—it simply exploits human trust. For businesses, the financial and reputational damage can be devastating.
Cyber insurance with social engineering cover provides a vital safety net. It ensures that when the worst happens, your business can recover quickly and confidently. Don’t wait until you become a statistic—review your coverage today.
The information on this page is intended for general educational purposes and necessarily simplifies some concepts for clarity. Insurance policies can differ widely between insurers, policy types, and jurisdictions. For guidance on your specific circumstances, you should review your policy documents carefully and consult a qualified insurance adviser, broker, or legal professional.