Fraud, Crimes of Opportunity Lead Risk Outlook for 2023
You hear the word “recession” a lot in projections for the U.S. economy in 2023.
Whether we’re headed for a recession in 2023 is a matter of opinion, but the consensus is that high inflation is expected to continue, along with rising interest rates and the lingering disruptions of the COVID-19 pandemic. As financial stress is expected to grow, we anticipate risk control in 2023 will be focused on risks related to the economic climate.
We’re already seeing an increase in fraud and opportunistic crimes related to inflation and the heightened cost of living. That trend is likely to continue over the next 12 months. People faced with a bleak financial outlook are not only more likely to turn to committing crimes for monetary gain but are also more likely to fall victim to scams that promise fast, easy cash.
Property Crimes Are Up
Looking at 2022 crime trends from the Council on Criminal Justice, homicides and gun assaults have gone down, but property crimes are up. Aggravated assaults and robberies declined in the first half of 2022 compared to the first half of 2021. Residential burglaries (+6%), nonresidential burglaries (+8%), larcenies (+20%) and motor vehicle thefts (+15%) all increased in the first half of 2022 compared to the first six months of 2021. In our claims data, we continue to see a rise in opportunistic burglaries from buildings and cars.
Property crime prevention includes making sure the areas around buildings are well lit and don’t provide places for intruders to hide. We suggest keeping ladders stored away and trimming tree branches that overhang the buildings so criminals don’t have easy access. Window and door security is also vital to keep intruders out. Property owners should be sure to always know who has keys to the buildings, and when a keyholder leaves the organization, the keys should be turned in and the locks changed.
Thefts of catalytic converters from vehicles rose sharply with the pandemic. We’ve seen those thefts stabilize in recent months, but as long as the materials in catalytic converters are valuable, people will continue to steal them. Safeguards to deter catalytic converter theft include keeping vehicles locked and parked in a secured, well lit area when not in use; parking close to building entrances; using security surveillance cameras in the area where vehicles are parked; adjusting or calibrating the sensitivity of vehicles’ alarms so that vibration will activate the alarms; and having the vehicle identification number engraved on the catalytic converter. Catalytic converter aftermarket devices, such as straps, clamps, cages and alarms, can also help deter theft.
With copper prices still high, thieves are targeting copper in every form and selling it to scrap yards for cash. The most popular items being targeted for their copper are outdoor air conditioning units. Buildings left unoccupied at night, as well as those located in rural areas, are considered easy targets. Also, these types of facilities tend to have large or multiple air conditioning units with a greater amount of copper than a single residential unit. Other sought-after items for copper scrap metal include wires, plumbing pipes and rain gutters. The high prices have made thieves bolder and more inventive than ever before. One scheme we’ve learned of involves thieves posing as construction or repair workers.
Social Media And Crypto Crime
Much of the fraud activity is happening online, including scams that involve cryptocurrency and social media. Social media scams take many forms but typically involve being contacted by someone behind a fake account. Individuals and businesses should be suspicious of unexpected communication and make sure they know whom they’re really interacting with online. Accounts should be kept as private as possible, and oversharing on social media should be avoided—the more a criminal knows, the easier the target.
Cyber criminals are constantly coming up with new ways to steal assets and information. In any business, human beings are the greatest vulnerability. Training people to spot potential scams is the best line of defense against a data breach. Some of the biggest data breaches we’ve seen worldwide were aided by a successful phishing attempt.
Not surprisingly, as cryptocurrency has become more popular, so have scams involving it. According to a June 2022 Federal Trade Commission report, people have lost more than $1 billion in crypto since the start of 2021. Victims also are getting caught up in fraudulent blockchain pyramid or Ponzi schemes. These often promise outsized returns
Supply Chain Still Causing Disruptions
Supply chain disruptions that started with the pandemic are still having an impact. This brings up the importance of risk management and business continuity planning to ensure such disruptions don’t negatively impact businesses and organizations. Speaking of the supply chain, vendors and contractors often have access to their customers’ data and systems. Any lapses in the security practices of these contractors and vendors could spell trouble for the customer. It’s not just about whether a third party is trustworthy with sensitive information; it’s how diligent they are with their own security practices.
Having a comprehensive business continuity plan is essential to weathering any storm. If we learned anything from the COVID-19 pandemic, it’s that every organization should be prepared for disruptions. In fact, nearly one in five businesses experience some type of disruption every year. There are numerous causes, including natural disasters, accidents, sabotage, power outages, environmental disasters and cyber attacks. Some disruptions can last only a few hours, while others may take months or years for the organization to bounce back from.
Research suggests 80% of businesses without a continuity plan that experience a major incident never reopen or they close within 18 months. However, with some planning and practice, this risk can be greatly reduced.
While the economic projections for 2023 aren’t pretty, the insurance industry can help protect customers by focusing risk control efforts on the threats associated with this economic climate.