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Loss-Limiting Fraud
Insurance
Product Details
Bank Card Protector Policy
OFFERED THROUGH
C. L. Frates and Company,
A LICENSED INSURANCE AGENCY
Why Loss-Limiting Insurance?
• Fraud protection systems will prevent most losses and will reduce severity.
But fraud can and will still happen. Insurance will supplement and support
your fraud detection systems.
• Loss-Limiting Fraud Insurance offers protection against:
– Lost or Stolen Cards - Counterfeit Cards - Skimming
– Phishing - Pharming - Vishing/Voiping
– Data Breaches - Online Purchases - ATM Losses
• Elan handles your enrollment verification, billing, and renewal.
• C. L. Frates and Company handles policy issuance, detailed insurance
questions, and fraud claims.
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Fraud Insurance Coverage and Rates
• Three fraud insurance levels are offered:
– Minimum Fraud Protection Insurance
– Value Fraud Protection Insurance
– Preferred Fraud Protection Insurance
• Institutions may elect to change levels annually, or under some conditions
as enrollment into associated tools is completed.
3
Minimum Fraud Protection Insurance
• Minimum Protection Fraud Insurance correlates to minimum use of best
practices and tools. Higher Premium rates account for limited fraud
protection.
• Insurance Rates and Coverage Levels:
– Insurance Rate: 3.5 BP of total sales1
– Minimum Annual Rate: $500.00
– Per Card Deductible: $1,500
– Per Card Loss Maximum: $10,000
– Per Occurrence Maximum Deductible: $10,000
– Per Occurrence Loss Maximum: $100,000
– Annual Aggregate Maximum Limit: $250,000
1 Insurance Rate assumes average portfolio activity and expected losses. In some cases the
insurance rate may vary from the expected rate. 4
Minimum Fraud Protection Insurance
• Required Tools and/or Practices:
– Maximum standard (default), daily withdrawal limits of $2,500 POS and $1,000 ATM
($3,500 total).
– Institution assigned Fraud Manager and/or Portfolio Reviewer.
– Active Fraud Training program for all debit card staff.
– Use of regular reporting, and real-time portfolio review tools as needed.
– Regular, immediate reporting of fraud per association (VISA, MC) standards.
– Understanding and use of the Elan Chargeback process.
– Understanding and use of the Transaction Authorization Block (TAB) product.
– Minimum Best practice options for new card mailing and activation.
– Use of Elan Expiration Date Checking and automatic card reissue.
• Non-associated, PIN-only portfolios (proprietary card BINs) under 500 cards are
exempted from this requirement.
– Use Address Verification Service (AVS).
– Use of Verified By Visa and/or MasterCard SecureCode.
5
Value Fraud Protection Insurance
• Value Fraud Protection Insurance correlates to a mid-range use of best
practices and tools. Rates for the protection reflect the lessened impact
expected from fraud losses, and allow for a higher per card loss maximum.
• Insurance Rates and Coverage Levels:
– Insurance Rate: 2.5 BP of total sales1
– Minimum Annual Rate: $500.00
– Per Card Deductible: $1,500
– Per Card Loss Maximum: $40,000
– Per Occurrence Maximum Deductible: $10,000
– Per Occurrence Loss Maximum: $100,000
– Annual Aggregate Maximum Limit: $250,000
1 Insurance Rate assumes average portfolio activity and expected losses. In some cases the
insurance rate may vary from the expected rate. 6
Value Fraud Protection Insurance
• Required Tools and/or Practices:
– All conditions for minimum fraud protection insurance must be met.
– TAB understanding and use of limiting rules.
– Use of FraudWatch or FraudWatch PLUS neural-network, transaction based fraud alerting
system.
– Use of Elan CVV/CVC, CV2 checking for both Signature and PIN.
• Non-associated, PIN-only portfolios (proprietary card BINs) under 500 cards are
exempted.
– Use of the Elan After Hours Hot-Carding Program.
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Preferred Fraud Protection Insurance
• Preferred Fraud Protection Insurance correlates to use of best practices
and tools. Rates for the protection reflect the minimum expected fraud
losses.
• Insurance Rates and Coverage Levels:
– Insurance Rate: 1.5 BP of total sales1
– Minimum Annual Rate: $250.00
– Per Card Deductible: $1,500
– Per Card Loss Maximum: $40,000
– Per Occurrence Maximum Deductible: $10,000
– Per Occurrence Loss Maximum: $100,000
– Annual Aggregate Maximum Limit: $250,000
1 Insurance Rate assumes average portfolio activity and expected losses. In some cases the
insurance rate may vary from the expected rate. 8
Preferred Fraud Protection Insurance
• Required Tools and/or Practices:
– All conditions for value fraud protection insurance must be met.
– Allowed change in standard (default), daily, withdrawal limits to include $2,500 POS and
$2,500 ATM.
– Active use and review of Visa CAMS and MasterCard Security Alert information.
Documented and understood plan for minor and mass reissue situations.
– Use of FraudWatch PLUS, with associated VAA information for Visa clients.
– Use of Elan Track 1 Name Matching.
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“I’m Already Insured, I have a Bank Bond.”
• Most bonds have a high per occurrence deductible minimum, or annual
loss minimum before coverage.
• Bonds tend to have a combined limit and less coverage.
• Bonds tend to limit territory coverage, such as U.S. and Canada only.
• Bonds often have exclusions such as forgery, on-line only, and more.
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General Policy Detail Summary
• Coverage does not require card encoding, embossing, or printing with the
cardholders account information. As a result, the policy would cover
duplicated cards (counterfeit), and internet transactions that do not include
a physical card.
• Coverage does not require the Insured to have a signed bank card
application for coverage. This provides coverage to the bank for a BIN
hit/card generator scheme.
• There is no condition in the policy that the funds must be verified. This
provides coverage for any off-line transaction. Every on-line system goes
down each day for updates, when they go down transactions are
processed off-line. Fraudsters use this time to process transactions from
International systems hoping to avoid declined transactions.
• Transactions exceeding the cardholder’s balance are covered. Coverage
includes overdraft protection when the account is tied to a credit line, or
secondary account. 11
General Policy Detail Summary
• Coverage applies even if the Insured can legally chargeback the
transaction to the cardholder. In addition, if the cardholder’s card is
skimmed and the cardholder is not aware of the compromise the policy
would still respond, regardless of Regulation E notification requirements
• Assuming Verified by Visa or MasterCard SecureCode is in place,
coverage includes internet transaction losses. Banks are now liable for
Internet transactions when the cardholder has signed up for either system.
• Coverage is worldwide. The policy covers a loss if the fraudulent
transaction occurred outside of the United States or Canada. This is a very
important element of the policy because without worldwide coverage it
would create a large gap in coverage since the bank has no control over
where a fraudster uses the card.
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Coverage – Bank Card Application
• Losses are covered even Bank Card
when you do not have a Application
signed application for the card
information.
• Most policies include a
Potential
requirement that the Insured Fraud
must have a signed
application for coverage.
• This requirement eliminates a
BIN hit/card generator
scheme from coverage.
13
Coverage – Overdraft and Credit Lines
• Overdraft and credit line losses Bank Card Overdrafts and
are covered. Application Credit Lines
• Other policies often require the
transaction must not exceed the
cardholder’s balance for
Potential
coverage. Fraud
• Other policies exclude coverage if
the you have either an overdraft
protection or the account is tied
into a line of credit such as a
second mortgage.
14
Coverage – Phishing and Pharming
• Phishing involves fraudulent Bank Card Overdrafts and
communications designed to Application Credit Lines
deceive consumers into divulging
personal, financial, or account Phishing,
Pharming, and
information, including account Vishing
user name and password, credit Potential
Fraud
card information and social
security number.
• Phishing and other technology
based attacks are all covered.
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Coverage – Off-line Transactions
• Off-line and floor limit losses are Bank Card Overdrafts and
covered. Application Credit Lines
• Many policies require fund
Phishing,
verification for coverage. Pharming, and
• Verification requirements Potential
Vishing
eliminate coverage for any off-line Fraud
transactions. Off-line
Transactions
• On-line systems are brought
down for updates resulting in off-
line processing.
• Fraudsters use this time to
process transactions hoping to
avoid declined transactions.
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Coverage – Verified by Visa
MasterCard SecureCode
• You are liable for Internet Bank Card Overdrafts and
transactions approved by Verified Application Credit Lines
by Visa and MasterCard
SecureCode, when the merchant Phishing,
Pharming, and
has enrolled. Vishing
Potential
• Losses are covered due to Fraud
misuse and abuse of Internet Off-line
verification systems. Transactions
Verified by Visa
or MasterCard
SecureCode
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Coverage – Regulation E
• Regulation E requires the Bank Card Overdrafts and
cardholder to notify you within 24 Application Credit Lines
hours to limit the cardholder loss
to $50, or 72 hours to limit the Phishing,
Pharming, and
cardholder loss to $500. Vishing
Potential
• Most policies void coverage if the Fraud
insured can chargeback the Off-line
transaction to others including the Transactions
cardholder. This may create a
gray area with respect to Verified by Visa
Regulation E or MasterCard
coverage. SecureCode
• This policy has no exclusion.
Losses are covered regardless of
whether the time conditions are
met by the cardholder. 18
Coverage – “White Card” Counterfeit
• All forms of counterfeit and Bank Card Overdrafts and
Internet fraud are covered. Application Credit Lines
• Many policies cover
Phishing,
counterfeit conditions, but Pharming, and
require the fake card to be Vishing
Potential
encoded, embossed or Fraud
printed with the “White Card”
Off-line
and Internet
cardholder’s account Transactions
Transactions
information.
Verified by Visa
• Other policies may not Regulation E or MasterCard
cover Internet transactions SecureCode
that do not include a
physical card.
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Coverage – International Transactions
• Losses are covered Bank Card Overdrafts and
regardless of the Application Credit Lines
geographic location.
Phishing,
• Many policies exclude International
Pharming, and
Transactions
coverage if the fraudulent Vishing
Potential
transaction occurred Fraud
outside of the United “White Card”
Off-line
and Internet
States or Canada. Transactions
Transactions
• Geographic limits create a
Verified by Visa
large gap in coverage Regulation E or MasterCard
since you do not have SecureCode
control over where a
fraudster acts.
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Optional Coverage – Extra Expense
• Extra Expense coverage applies to
card reissue and similar costs, Bank Card Overdrafts and
often associated with CAMS or Application Credit Lines
MasterCard Security Alerts.
• Extra Expense coverage is Phishing,
provided directly by C. L. Frates International
Pharming, and
and Company and not through Transactions
Vishing
Elan. Potential
• The cost of Extra Expense Fraud
coverage is associated directly to “White Card”
Off-line
portfolio size and not surrounding and Internet
Transactions
fraud controls. Transactions
• To learn more about Extra
Verified by Visa
Expense coverage, you may select
the appropriate box on your Regulation E or MasterCard
enrollment form, or you may SecureCode
contact the person listed at:
www.elanbankcard.com
Extra Expense
(Card Reissue)
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Optional Coverage – ID Theft
• ID Theft coverage concerns costs
Bank Card Overdrafts and
associated specifically with the
Application Credit Lines
loss of personal information.
• ID Theft coverage is provided
Phishing,
directly by C. L. Frates and International
Pharming, and
Company and not through Elan. Transactions
Vishing
• The cost of ID Theft coverage is Potential
associated directly to portfolio size Fraud
and not surrounding fraud controls. “White Card”
Off-line
and Internet
• To learn more about ID Theft Transactions
Transactions
coverage, you may select the
appropriate box on your enrollment Verified by Visa
form, or you may contact the Regulation E or MasterCard
person listed at: SecureCode
www.elanbankcard.com
Extra Expense
ID Theft
(Card Reissue)
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Coverage - Summary
• All listed fraud is covered. Bank Card Overdrafts and
• Limits and deductibles are Application Credit Lines
structured for the card
Phishing,
industry with a per card International
Pharming, and
deductible of $1,500 vs. Transactions
Vishing
Potential
most competitors $5,000 Fraud
or more. “White Card”
Off-line
and Internet
• The policy is a stand alone Transactions
Transactions
policy and will not be
Verified by Visa
affected by losses in the Regulation E or MasterCard
Financial Institution Bond. SecureCode
• Optional coverage is
available for Extra Extra Expense
ID Theft
Expense and ID Theft (Card Reissue)
situations. 23
General Policy Exceptions
• Any loss covered under the insured’s financial institution bond, other bond,
or other insurance protecting against loss from dishonest, fraudulent or
criminal conduct.
• Any loss resulting directly from mechanical failure, faulty construction,
error in design, latent defect, fire, wear or tear, gradual deterioration,
electrical disturbance or surge which affects an electronic terminal.
• Any loss resulting directly from failure or breakdown of electronic data
processing media or errors or omissions in programming or accounting.
• Loss of potential income.
For specific information and/or detailed questions, please contact the person
listed at: www.elanbankcard.com
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Sample Pricing
• Institution A:
– Card Program Size: 2,500 total cards
– Transaction Count: 425,000 annual transactions
– Total Spend: $18,600,000
– Estimated Fraud Amount: $13,992
• Preferred Program: $2,800
• Value Program: $4,650
• Minimum Program: $6,500
• Institution B:
– Card Program Size: 9,400 active cards
– Transaction Count: 1,900,000 annual transactions
– Total Spend: $83,300,000
– Estimated Fraud Amount: $59,976
• Preferred Program: $12,450
• Value Program: $20,750
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• Minimum Program: $29,050
Enrollment Steps
• Visit www.elanbankcard.com for enrollment materials.
– Should the Elan program not fit your needs, you may contact C. L. Frates and Company
directly to structure a personalized insurance program.
• Billing is completed annually. Program qualification review is completed
during renewal.
• If converting over to Elan, contact your present processor for verification of
the required tools and processes. During renewal, Elan will take care of
this task for you.
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Available Web Based Sessions
• Visit www.elanbankcard.com for Insurance specific information,
presentations, and enrollment materials.
• Other, available sessions:
– Web Access for all sessions: https://www.livemeeting.com/cc/elan/view
– Presentation Downloads: https://clientaccess.elanfinancialservices.com
– Introduction to Transaction Authorization Block (TAB)
• Goal: Overview of Transaction Authorization Block (TAB), including the monthly
trends bulletin and interaction with FraudWatch tools.
• Audience: Anyone using or considering using TAB.
• Recording ID: TABIntroduction (no spaces)
• Recording Key: TABIntroduction (no spaces)
– FraudWatch Plus Overview:
• Goal: Overview of FraudWatch Plus and how it can assist your institution.
• Audience: Anyone interested in FraudWatch Plus.
• Recording ID: FWPOverview (no spaces)
• Recording Key: FWPOverview (no spaces)
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Questions?
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