Table of Contents
- What Chargeback Insurance Typically Doesn't Cover
- Friendly Fraud Coverage
- Chargeback Insurance Premiums Change Depending on Payout
- Achieving the Best ROI on Chargeback Management
- Frequently Asked Questions
Chargeback insurance can cover some kinds of friendly fraud chargebacks, if merchants know how to take advantage. This is the second in a two-part series on chargeback insurance pros and cons. Read Part One
What Chargeback Insurance Typically Doesn't Cover
In our last article on this topic, Chargeback Insurance Pros and Cons, we touched on how chargeback insurance typically will not cover a chargeback if the item was received broken, or was never received. It also won't cover chargebacks rooted in clerical errors, such as being overcharged or duplicated charges for the purchase. Nor will insurance cover delivery of digital goods, such as game applications, entertainment downloads, e-books, webinars, etc.
Because chargeback insurance doesn't cover the above categories, providers will typically require that a merchant provide evidence that a chargeback doesn't fall into these categories before they provide coverage. This can sometimes be a bit tricky in cases of friendly fraud where a customer falsely claims that an item was never received or was damaged in shipping.
However, if merchants take the initiative to gather the right information during a transaction, have that information available in case of a dispute, and know how to deal with their chargeback insurance provider appropriately, these cases can be covered.
Friendly Fraud Coverage
Depending on the policy, chargeback insurance often will cover 'friendly fraud,' when a customer is trying to get something for nothing by filing a false chargeback claim. This coverage typically only applies if the merchant has certification of identity validation on the purchase and delivery, and the item or items were clearly delivered as promised and in good condition. In other words, only if it is absolutely certain that friendly fraud has taken place.
If a transaction is covered, the onus is still on the merchant to file a claim within the time allowable to challenge a chargeback - usually 90 days.
For many merchants who don't work with a chargeback representative, chargebacks are handled monthly if at all. Sometimes they are simply written off as part of the cost of doing business. When they are addressed, by the time the merchant gets around to filing the insurance claim and the insurance company investigates the case, there can often be less than 30 days to resolve the issue. Ideally, chargeback insurance claims should be filed immediately. This requires merchants to have a system in place to monitor chargebacks.
Chargeback Insurance Premiums Change Depending on Payouts
Of course, while merchants are looking for a reasonable ROI, so are the insurance companies. If a merchant is paying $1,000 a month for insurance, and averaging $2,000 a month in insurance claims being paid out, the merchant can expect to see a significant increase in their policy rates. Due to the business model of insurance companies, businesses who partner with them often end up paying out more than they receive, and the insurance providers do their best to keep it that way.
Although chargeback insurance can be a good fit for some merchants, online merchants should consider teaming with a fraud and chargeback prevention company that will help analyze the 'why' of chargebacks, not just the 'how much' .
Achieving the Best ROI on Chargeback Management
More peace of mind and a much higher ROI can be found by dealing with a company that specializes in chargeback prevention as well as representation, and also helps identify the likelihood and causes of fraud.
Unlike insurance providers, the incentives of a chargeback management company align with those of the merchant.
Whereas an insurance provider is incentivized to provide as little benefit as possible, since every claim costs them money, a chargeback management company is incentivized to provide as much benefit as possible to ensure that merchants are satisfied enough to continue employing their services. Achieving better results for their customers only helps a chargeback management company, which means you know that the service to which you're devoting some of your hard-won revenue will be fighting to protect your bottom line as well as theirs.
Don't wait to find out whether what you thought was the perfect fit for you is actually the best solution, or whether there are better options available. If you have chargeback insurance or are considering it, call a chargeback representative today and spend 15 minutes on the phone to find out what insurance does and does not cover, and how you can best protect your business from chargebacks.
Chargeback Gurus manages all aspects of the chargeback process, including monitoring clients' sales on a daily basis, offering weekly or even more frequent reports, and aggressively battling each and every chargeback, regardless of the cause—winning up to 70 percent of chargebacks.
In addition, with each new client, analysts come on board, evaluate the business and make the right recommendation to limit chargebacks, be prepared to battle those that come in, and learn how to identify potential fraud.
It's like the merchant now has a custom-fitted raincoat, and an over-sized umbrella—along with its own weather forecast.
FAQ
What is chargeback insurance?
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