Cyberattacks and wire fraud are on the rise in the real estate industry. According to a 2022 survey by the American Land Title Association, 86% of respondents said the volume of cyberattacks either increased or remained the same in 2021 when compared to 2020.
As you know, one of the highest expenses at closing is title insurance. And despite a slower real estate market in 2023 and fewer closings, fraud is still a big risk during the home buying closing process.
How it works
The soon-to-be homebuyer receives an email that appears to be from a known individual involved in the current real estate transaction. The fraudulent email contains wire transfer payment instructions (perhaps with new information or a change to the process) with the wire transfer request for the down payment or closing costs. The funds are sent to the fake email account. Chaos ensues.
Often called “social engineering”, this is an attempt to manipulate someone into sharing personal and confidential information via phone, email, text or fax to gain quick and easy access to funds or securities being transferred or paid at closing. The risk to the consumer is real and costly, but it’s also a threat to the title industry.
Fraudulent wiring instructions, hacking, and extortion crimes can have a profound impact on critical operations within a title agency. And since many errors and omissions (E&O) carriers are excluding social engineering scams in their coverages, there’s a significant exposure gap in the market, which has paved the way for fraud exclusions.
5 ways to protect your clients
How can you help protect your clients amidst this risk?
Make sure your clients are aware of the threat of wire transfer fraud.
Get them the best insurance - with inclusive social engineering coverage or added protection.
Get them the best insurance - with inclusive social engineering coverage or added protection.
Recommend technology fraud/social engineering or security training for their employees.
Advise them to use encrypted data and emails and multi-factor authentication (MFA) and embedded steps to confirm authenticity of sender.
Expert advice goes a long way.
At Vanguard Specialty, we work exclusively with General Star Indemnity Company, a leader in the Title Agents E&O market. The AM Best A++ rated carrier is available in all 50 states (compared to 38 states for many competitors) and includes up to $150,000 in coverage against social engineering scams through its Fraudulent Escrows Funds Transfer coverage.
We leverage our more than 100 years of combined experience in E&O insurance to develop, manage, underwrite and distribute innovative insurance products and services for our carrier partners.
If you’re interested in learning more about wire funds transfer coverage for your clients, please contact Cindy Magana, Chief Underwriting Officer at Vanguard Specialty, at cindy.magana@vanguardspecialty.com or 470-807-6968.