SBDC e-news – November 2016 Insurance

Does your insurance cover scams?

A recent scam involving the hacking of a Perth real estate agent’s trust account at a real estate agent in Perth, has thrown the spotlight onto the issue of insurance against loss, in particular, what’s covered by public liability and professional indemnity insurance, and what is not.

According to CGU Insurance, liability and indemnity are two types of insurance that protect your business against legal claims.

Public liability insurance protects you and your business against the financial risk of being found liable for personal injury, property damage and economic loss.

Professional indemnity insurance protects you and your business against claims for alleged negligence or breach of duty arising from an act, error or omission in the performance of professional services.

In the case of the real estate agent, it was their daily reconciliation process that allowed them to notice the scam and stop it before the money was transferred overseas.

If the agent had not had appropriate systems in place to regularly reconcile clients’ trust funds, and instead had been successful scammed, then clients may have been able to seek a claim for the loss of their bond money on the basis of the agent’s negligence.

In this case the theft was prevented, no funds were lost, and all is well. However, despite this, the agent has implemented more secure connections to its bank through the use of a Security Token which changes the internet banking authorisation passcode on a continual basis.

While this story has a happy ending, it’s timely to consider the alternative and if this were to happen to your business, would you be sufficiently covered under your current public liability or professional indemnity insurance? Do you know if your existing policies cover you for cyber attacks and online scams?

Get some background information on business insurance before calling your broker.