Fraud insurance as a complement to credit Insurance

Fraud in account sales

Fraud in account sales is a growing concern, particularly in the fast-paced trade of perishable goods, where it occurs more often than businesses would like. But what types of fraud are involved? And how can you ensure that losses due to fraud are covered? Sander van Eijndthoven, Senior Account Manager at Meijers Credit, explains.

"First and foremost: safeguard your business with credit insurance. If you frequently conduct business on account, it is wise to have solid credit insurance in place. A credit insurance policy covers losses when a customer is unable to pay their invoices—whether due to financial difficulties or bankruptcy. Most customers, of course, are trustworthy. You often have long-standing business relationships and know each other well. However, there are also companies or individuals who intentionally commit fraud, particularly in industries that involve fast-moving trade in perishable goods such as vegetables, fruit, meat, and fish. Fraud tends to peak in the final months of the year when the market is booming, and businesses are racing to meet their year-end targets. During this hectic period, deals are made at lightning speed—creating the perfect opportunity for fraudsters to strike. This type of fraud typically occurs in three ways."

1. Fraud from an existing company

The first type of fraud, as described by Van Eijndthoven, is committed by an existing company that deliberately engages in deception. "These companies often present positive financial results to insurers to secure the highest possible credit limits. Another red flag is the lack of price negotiation—fraudsters readily accept high prices without hesitation. This type of fraud is particularly effective because scammers can execute their scheme multiple times in a short period, targeting numerous businesses simultaneously. Instead of selling the company afterward, the fraudsters simply disappear without a trace. This form of fraud is especially common in Germany."

2. Fraud using another company’s name

In the second type of fraud, scammers place an order under the name of an existing company without actually working there or having the authority to place orders. "They request that the ordered goods be delivered to a location near the company’s official premises, such as an adjacent warehouse or even a nearby parking lot," Van Eijndthoven explains. "Once the goods arrive, the fraudsters quickly load them up and disappear without making any payment. A common red flag in this scheme is inconsistencies in email signatures, such as incorrect addresses or phone numbers. This form of fraud is particularly prevalent in Italy."

3. Fraud using a fake order from a well-known company

In the third type of fraud, scammers pose as representatives of a well-known and reputable company in the market. "The communication feels legitimate, and the documents are indistinguishable from the real ones," says Van Eijndthoven. "In fact, even the company’s official address matches the genuine one." The fraudsters claim they will handle the transport themselves, using an unsuspecting third-party logistics provider. "The transporter picks up the goods and is then instructed to deliver them to a different location. As a result, the invoice remains unpaid, and the goods are never seen again. This is broad daylight theft, where both your company and the transport company fall victim to fraud. This type of fraud is particularly common in France."

Is fraud always covered by credit insurance?

Van Eijndthoven clarifies: "In the first scenario, you are dealing with the actual company whose identity you believe to be legitimate. Therefore, the financial loss is covered by credit insurance, provided the agreed credit limit is sufficient. However, the situation is very different in the other two cases. In these instances, you are not conducting business with the legitimate company you believe you are dealing with, but rather with fraudsters. As a result, the fraudulent entity is not covered under your credit insurance policy. In other words, this is a case of identity fraud, which is not covered by credit insurance."

Fraud insurance offers a solution

For these two types of identity fraud, Van Eijndthoven has a clear recommendation: "Taking out fraud insurance is the solution. It provides coverage for financial losses caused by intentional wrongful acts committed by both external parties and internal employees."