How can a company prevent or protect themselves against post-delivery fraud?


How can a compay selling high-value products protect themselves against post-delivery fraud (including but not limited to returns fraud)?

Can we insure ourselves against fraud or somehow pass on the risk/liability to another organisation?

What measures can we take to reduce the likelihood of being defrauded by consumers who claim we gave them a fake diamond ring, for example?

Ecommerce Insurance Fraud

asked Mar 9 '11 at 03:01
Nikolay Piryankov
683 points

2 Answers


Welcome to the wacky world where what is blue is green, what should be is a could be, and even the most ardent Democrat (me) begins to believe in Tort reform (please).

There are many things that you can do to protect yourself from the common cold. A hat. Washing your hands. Warm tea. Drying your hair. Washing your hands. Not touching toddler's hands. And in the end, sometimes you will still get the cold. So, you bundle up and have some chicken soup and think about how soon you will get better.

Here are some simple things you can do to improve your chances of limiting your exposure to frauds and protect yourself from their scams:

  1. Stated Return Policy with "check-box" of acceptance. Have a clear policy on your site. Say what you do when there is a problem. How to file a claim. What costs are and are not covered. It is usually not in your interest to cover all shipping costs. But make a return policy that works in your industry for your market.
  2. Serial Numbers Embedded them, seal them, staple them, burn them in. Make each product you send unique. I had a client that sold high end furniture that hid their stamp on each product. Once challenge about the poor quality of a product -- he was able to clearly point that there was no stamp -- it was not his product.
  3. Document : Record what serial number went to what client and on big ticket items where there is potential concern -- take a picture. Hell, even phones can take a picture-- take a picture anyway. Upload it and add it to the customer record in your CRM.
  4. Add to the financial "I will have to eat this" fund: Most of the time it is not worth the haste and headaches. When there is an option to simply take a product back in accordance with the return policies. Take it and sigh a sigh of relief.
  5. Use shopping platforms with sellers protection plans like eBay and Amazon. Both of these two distributors and many other like them have their own return policies, systems, claims adjudication processes and more. They also have user communities that allow for some measure of accountability.
  6. Business Insurance : Of course you are going to have business insurance. And if is highly likely that if you go with a reputable provider there will be coverage for you in the products and completed operations clause (or what ever they choose to call it) Here is a sample with Farmers. Theirs includes: "The deck you built a year ago was flawed, causing a new building owner fiscal disaster. A legal notice appears in the mail informing you of a lawsuit. The case goes to court and your former client wins. Farmers Business Liability Insurance can handle the defense costs and, if it comes to it, the legal damages for which the policyholder is responsible." Now of course, that doesn't cover your example above. But if they cover when it actually was your fault -- what about when it isn't because you were being scammed? Thank goodness for insurance company lawyers. (Don't tell anyone who knows me that I said that) I am sure that when you meet with your business insurance agent they will help you find a policy that will match your situation.
  7. Anti-Fraud Insurance : there are companies that provide a package of antifraud insurance. You will have to look very closely at your own business model, margins and risk of exposure to decide if that is something you want to do. Here is a sample
  8. Legal Services : You might have a regular lawyer to immediate respond to claims with a strongly worded letter. You might not. I don't. I can't afford it. I write my own. A lot of my peer swear by Pre-paid legal's business program. They say that quality attorneys jump to your defense the minute you call. They call it "legal insurance".

But most of all here is my favorite, because I use it the most:

  1. Love Your Credit Card Company : Oh baby, you pay for it. All those fees for the "privilege of using their services" Death by a thousand little cuts -- well, until you need them. Then step right up. If you use your credit card company as your merchant account on your website, or even if you don't-- but you have a primary card -- like American Express -- then you call them right up and say: Our company accepted payment from this or that Visa card transaction number blah blah blah and they are scamming me. And let the credit card companies deal with it mano-oh-mano.
Of course it is never quite as easy as that. But let me tell you, over the years, my business credit card company has more than earned (almost all) their fees in being the skilled, trained advocate to get me what I paid for, get what was due me in my hands, and cover by backside.
answered Mar 23 '11 at 12:22
Joseph Barisonzi
12,141 points


You could always order a diamond from Blue Nile and try to grok what they are doing to prevent post delivery fraud. They have a 30 day return policy so theoretically you won't lose any money.

answered Mar 23 '11 at 08:55
Mike Walsh
745 points

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