Corporate insurance is often split in several ways. From trade credit insurance to public liability insurance, there are many combinations that can be added together to provide full coverage.
With so many products available, you may be left wondering what the differences are and what gaps in coverage there may be. Here, we explain the scope of coverage for business fraud insurance, including what’s covered and what isn’t.
Broadly, the scope of business fraud insurance is split into a few categories. Those include:
Internal fraud is defined as any type of fraudulent activity committed by an employee within a business.
External fraud covers fraud attempts from those outside of a business. This could be a customer, or a prolific attacker.
With the above in mind, business fraud insurance covers a variety of different attacks, both internally and externally.
Theft is a point-blank example of fraud. Whether an employee steals property from a company or if a burglar steals equipment, business fraud insurance covers the losses.
Whether it’s payroll fraud, invoice fraud, or payment redirection, most of these attacks fall under the umbrella of financial fraud, the majority of which is covered under business fraud insurance.
Businesses deal with a lot of documentation. From contracts between suppliers to invoices in need of sign off – if these documents are filled out under false pretences, or by someone pretending to be another person, you might end up paying a fraudster rather than a legitimate tradesperson. Regardless, you’re covered.
While business fraud insurance doesn’t necessarily cover all forms of cyber crime, certain types of electronic crime undertaken to commit fraud will be included in your policy.
Although social engineering can be quite broad, it is covered by most business fraud insurance policies. Social engineering attempts to manipulate others – a key attribute of fraud.
Supplier fraud is an external fraud risk and covers a range of different attacks like false invoicing, overcharging, and payment diversion.
Laws like distance selling regulations make it easy for customers to return items ordered from online retailers. Customers can exploit a retailer’s lenient return and refund policies for personal gain.
Likewise, there are certain types of attacks that may seem fraudulent, but under scrutiny, don’t hold up to the criteria for business fraud.
While non-payment is a risk with fraud, sometimes, there are legitimate reasons that prevent a business from completing its payment for the services delivered. In these cases, trade credit insurance would be a more appropriate form of protection.
Your reputation is a difficult thing to protect. Unfortunately, fraud often has knock-on effects that extend beyond just financial impacts. When word gets around, it can be hard to come back.
Fraud insurance will not cover errors made by employees. That means if a payment has been made to the wrong customer, or if a customer issues a payment using incorrect details, your insurance will not indemnify you. Fraud insurance would cover if the employee has been duped or misled by the customer in question.
Cyberattacks happen for all sorts of reasons. Sometimes, attackers get a kick out of taking down vital communication systems, or holding companies under ransom. These types of attacks are not covered under business fraud insurance.
If someone from your business submits a payment to a supplier under false pretences, they may be covered under your fraud insurance, but only if they were deceived by the recipient.
While the cover provided by both trade credit insurance and business fraud insurance revolves around finances, they differ in one major aspect: the cause. For an attack to be fraudulent, there needs to be deceit or manipulation. The distinction is clear: with fraud insurance, a crime is committed. With credit insurance, a customer defaults.
Although there are some types of mandatory business insurance, business fraud insurance is not one of them.
Allianz Trade works globally with industry-recognised specialists and large corporations, providing trusted insurance for a variety of purposes. Whether you’re an existing or brand-new customer, we’d love to hear from you. Our team offers a mixture of proactive risk mitigation insights, as well as swift decisions on your claims.
Contact us for a free, no-obligation consultation on how business fraud insurance can help you.
Allianz Trade is the global leader in trade credit insurance and credit management, offering tailored solutions to mitigate the risks associated with bad debt, thereby ensuring the financial stability of businesses. Our products and services help companies with risk management, cash flow management, accounts receivables protection, Surety bonds, Business Fraud Insurance, debt collection processes and e-commerce credit insurance ensuring the financial resilience for our client’s businesses. Our expertise in risk mitigation and finance positions us as trusted advisors, enabling businesses aspiring for global success to expand into international markets with confidence.
Our business is built on supporting relationships between people and organisations, relationships that extend across frontiers of all kinds - geographical, financial, industrial, and more. We’re constantly aware that our work has an impact on the communities we serve and that we have a duty to help and support others. At Allianz Trade, we’re strongly committed to fairness for all without discrimination, among our own people and in our many relationships with those outside our business.
