Plastic card fraud losses which
include credit, debit and ATM
cards cost banks billions of
dollars each year, and the
expense associated with these
types of losses is on the rise.
The Financial Institution
Bond (FI Bond) has a Debit
Card Fraud Rider that typically
covers debit card fraud losses
that occur at an electronic
swiping mechanism (merchant
or ATM) within the United
States. Coverage can usually
be expanded to include
worldwide. FI Bond carriers
offer a single loss deductible
which is usually equal to
the FI Bond deductible or
less if acceptable to insurer.
Single loss limits are typically
$100,000 to $500,000 per
incident/occurrence of loss,
not per fraudulent transaction.
Keep in mind the Debit Card
Fraud Rider may not cover
fraud involving telephone,
mail order or internet sales.
In addition, most FI Bond
carriers do not cover expenses
associated with re-issuing
cards, customer notification
or credit monitoring. Some FI
Bond carriers offer credit card
fraud coverage in addition to
debit card.
Another option is the
broader stand-alone Plastic
Card Fraud policy which
covers credit, debit and ATM
card fraud. This policy can
be endorsed to include fraud
involving telephone, mail
order and internet sales. The
deductible can be written as
low as $10,000 for multiple
cards losses or $1,500 if only
one card is compromised.
The typical annual aggregate
limit is usually $500,000. This
stand-alone policy can also
include coverage for expenses
associated with replacing
compromised cards and
notifying cardholders.
Talk to your card processor
and inquire what internal and
external controls or tools are
available to limit and mitigate
potential loss exposure. Review
your Plastic Card Fraud Rider
specimen policy language and
compare that to the cost of
purchasing the broader standalone
policy.