Didyou know

eCommerce Insurance covers losses on approved orders that are fraudulent, but the provider has the final say in what orders are covered.

Insurance has been around for a long time, and e-commerce insurance certainly does work. However, like any other form of insurance, these companies are in business to make money, so their costs can be extensive and the orders that are covered may be limited.

eCommerce insurance can be very costly for what you get. It may require you to set up elaborate fraud-prevention techniques on top of the insurance. It can also affect sales conversion by forcing you to only accept orders that are on the bottom of the risk pile. For example, you can only accept orders when AVS is a full match.

 

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ecommerce insurancetechnique overview

Merchants use e-commerce insurance to cover their losses on orders that are fraudulent. Key considerations when implementing or buying this functionality include:

  • Are all goods and services covered by the policy?
  • What is the notification process?
  • What types of information need to be collected and provided for a claim?
  • Does the policy require that the merchant perform collection activities?
  • How will future premiums be affected by losses?

How does it work?

Merchants will enter into an agreement with an underwriter that will require them to pay a preset basis point rate for each order they desire to have insured. Merchants will probably be required to have certain fraud-prevention techniques in place. These could be based on the standard association fraud tools, such as AVS and card security schemes, but could also include the use of hot lists, fraud-screening services and/or the use of financial limits. Typically these policies will classify merchants by levels of risk based on the cost of their goods sold, the type of goods sold, and the fraud-prevention tools in place.

 

How do you use the results?

The best practice with e-commerce insurance is to combine it with a broader strategy in which you use the insurance for those orders you would normally review, or on those orders that are in the gray area (i.e., not really good, but not really bad). The intent again is to automate the process, so this assumes if a merchant takes out insurance on all orders they would normally review that they aren’t reviewing these orders now that they have insurance.

AdditionalResources

  • FUNDAMENTALS FOR SELECTING A FRAUD SOLUTION PROVIDER.

    The Fundamentals For Selecting a Fraud Solution Provider is intended for organizations looking to gain an introductory understanding to the fraud solution marketplace and the fraud solution providers servicing that market. The competitive landscape document makes references to over 150 fraud solution providers.

  • Making Sense of the Fraud Vendor Landscape.

    With so many fraud vendors and solutions to choose from in the market, how do you know what will work best for your company? How do you compare vendors and solutions? This session provides a method to categorize fraud solutions and services into 8 groups so you can better perform apples-to-apples comparisons. The session builds on the “Moving from Tools to Solutions” session by providing a description of what each group focuses on, where they are best applied, along with a list of commonly used vendors in each category.

  • Ecommerce Fraud Moving from Tools to Solutions.

    This session covers what constitutes a fraud solution and categorizes the many types of third party fraud tools. The course outlines the common terminology of fraud solutions and describes the capabilities needed to implement a fraud solution.

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keynotes