IFSO Scheme Issues Fraud Exclusions Warning

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Social Media Insurance Scams

Understanding the IFSO Warning on Social Media Insurance Scams

The Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) has warned businesses that if they’re involved in an online marketplace scam, insurance may not cover them.

“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,” Karen Stevens, Insurance & Financial Services Ombudsman says.

The IFSO Scheme is a voluntary industry scheme that provides insurance for businesses that sell goods or services online. The scheme has a number of exclusions, including one for fraud. This means that businesses may not be covered by insurance if they are involved in an online marketplace scam.

Businesses should be aware of the risks of selling online and take steps to protect themselves from fraud. This includes verifying payment before handing over any items and being wary of buyers who make unrealistic offers or requests.

Insights from the IFSO Scheme: Key Highlights of the Warning

The IFSO media release detailed a case in which a business was defrauded out of $10,000 when selling car parts on Facebook Marketplace. The IFSO Scheme found that the buyer had obtained the items under false pretence, and the insurer was therefore able to rely on the exclusion to decline the claim.

“In a recent case investigated by the IFSO Scheme, Ajay* sold some car parts on behalf of his company, including a gear box and motor, clutch and aluminium radiator. He listed the items on Facebook Marketplace, and someone agreed to buy them for $10,000.

“A few days later the buyer said payment had been made, and sent a copy of a New Zealand Driver’s licence which he said belonged to his partner. A woman claiming to be the buyer’s sister arrived at the company’s premises and collected the items. However, payment had not been made, and when Ajay realised this, he filed a police report and made an insurance claim on behalf of the company.

“The insurer declined Ajay’s claim because of the fraud exclusion, which stated that “loss caused by… any… false pretence practised on you” was not covered.”

Stories like this are far too common. It serves as a good reminder for businesses to be wary of scams and to make sure to verify payments before handing over items.

Strengthening Your Defence: Fraud Exclusion Measures for Business Owners

If you are a business that sells items online, it is important to be aware of the risks of fraud and to take steps to protect yourself. You should also make sure that you have adequate insurance cover in place.

Here are five quick tips. Be sure to research the online marketplace before you list your items. Only accept payment from verified buyers. Be wary of buyers who make unrealistic offers or requests. Never send items to a buyer before you have received payment. Keep a record of all transactions. But it’s of course more complex than simple tips. Remaining vigilant requires constant care.

The IFSO Scheme resolves complaints about insurance and financial services, and its service is free for consumers. People can make a complaint to the IFSO Scheme at www.ifso.nz or by calling 0800 888 202.