Insurance may not cover online marketplace scams, IFSO warns

Insurance may not cover online marketplace scams, IFSO warns | Insurance Business New Zealand

Insurance News

Insurance may not cover online marketplace scams, IFSO warns

Ombudsman says that fraud exclusions are the norm for business policies

Insurance News

By
Kenneth Araullo

Kiwi businesses are being alerted to the limitations of their insurance policies regarding online fraud, as stated by the Insurance & Financial Services Ombudsman Scheme (IFSO Scheme).

Companies could be left vulnerable if their goods are swindled in online marketplace deceptions. IFSO Karen Stevens said that business insurance policies routinely exclude fraud losses. This exclusion means that insurance might not provide the usual protection if businesses are tricked into parting with their goods.

“Things like Facebook Marketplace scams have increased in the past few years, meaning there’s a real risk to businesses if they aren’t alert and vigilant when selling items,” Stevens said.

A case recently reviewed by the IFSO Scheme highlighted this risk. A person acting for his firm sold various car components online for a sum of $10,000. Following a claim that payment had been made, the items were collected by a person alleging to be the buyer’s relative. The transaction turned out to be fraudulent, with no payment forthcoming, leading the seller to file a police report and an insurance claim.

The claim was subsequently rejected due to the fraud exclusion clause, which explicitly disallows claims for losses incurred through deceit.

The IFSO Scheme, upon examination of the police report which categorised the incident as a deceptive act, agreed that the insurer was justified in denying the claim based on the evidence of false pretence.

“This was obviously not welcome news,” Stevens said, she also said that it serves as “a good reminder for businesses to be wary of scams and to make sure they’re verifying payment before handing over any items.”

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