What is chargeback insurance?
In an ideal world, chargeback insurance is the protection you need from chargebacks. At first glance, chargeback insurance works like any other insurance policy. You pay a monthly premium to the insurance company, who then covers the cost of the chargebacks and fees.
But, the reality is that this insurance coverage varies tremendously. Not every policy is the same nor do these insurance policies protect and cover you in all chargeback instances. There is a lot of onus and expectation on you, the merchant, to know what your chargeback insurance policy includes and doesn’t include.
Too many merchants falsely assume they have complete protection and coverage from chargebacks, when in fact they do not.
How does this insurance work?
This merchant insurance is designed to protect you in fraud cases when for example, a credit card charge was not authorized and it includes protection for claims that are a result of your liability to your bank.
Chargeback insurance may apply in the following scenarios:
- Purchases made with a lost or stolen credit card before the card owner reports the card missing.
- Charges made with a fake or counterfeit credit card and account number.
- When the shipping information is edited after the purchase is completed.
- Problems with the signature – either it doesn’t match that on file or is not provided.
When you make a claim against your chargeback insurance for such an occurrence, depending on your policy, you might be reimbursed for the cost of the lost item or your loss of profit.
It’s important to understand that most chargeback insurance policies only include payment card losses that have been processed through a recognized payment gateway or processor.
Hint: Verifi is a recognized and leading payment processor. We work with and for you to prevent such fraudulent charges from occurring and to identify fraud and chargeback risk before it happens. In addition, our leading Global Payment Gateway is the leading solution in providing comprehensive payment processing.
When does chargeback insurance not apply?
Unfortunately, chargeback insurance won’t protect you from all chargebacks. In fact, the scope of this insurance is rather limited.
Chargebacks that aren’t covered by chargeback insurance include:
- Most friendly fraud claims are not covered. Now, you likely know that friendly fraud is one of the most common occurrences of chargeback fraud. When your customer, for example, claims that their purchase wasn’t delivered or the item delivered doesn’t match the description – you are not protected. This is why you need a complete end-to-end solution in place that is working for you to authenticate, authorize, track and process your ecommerce sales. The more data you have, the easier it is for you to prevent this friendly fraud from occurring.
- When your chargeback ratio exceeds defined limits, you might discover that you don’t have the protection and coverage you thought you had. Because of this, it’s vital that you are aware of how you can manage your chargeback ratio, keeping it within the positive range. Using a solution such as Verifi’s CDRN can help you lower your chargeback ratio and protect you from unnecessary business loss.
It is worth your time and effort to thoroughly read and understand exactly how and when you’re protected by your chargeback insurance policy. Reading this information after the fact, will not prevent revenue losses, escalating chargeback ratios, or increasing bank fees.
Is chargeback insurance enough protection for my business?
No. You need to do more than rely on chargeback insurance. Too many merchants have assumed that chargeback insurance is the only solution they need. But, as you know, this insurance policy covers a very limited range and scope of chargebacks.
Think of chargeback insurance as a fallback plan. The first thing you need is a preventive solution in place that works for you to stop chargebacks from occurring. To do this, you need to work with a trusted payment processing company.
Since 2005, Verifi has been the leader in chargeback prevention for businesses of all kinds and sizes. We partner and work with start-ups to top Fortune 500 companies to provide payment protection, reduce risk and maximize profits. The numbers and facts don’t lie. Chargebacks can and will cost you your business. Work with Verifi to get the protection, management, advice and security you need to build customer, investor, employee, card issuer, and third-party confidence. Fast, efficient customer processing that gives you the extended protection against chargebacks and fraud can be the only option for your business.