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Before the Auction: Understanding Insurance

by Nancy L. Hix

Insurance traditionally provides a feeling of security and protection. You pay a premium, and the coverage outlined in your policy takes affect. A few auction sites offer insurance coverage to protect users against loss and potential fraud, but there's no policy to retain and no premiums to pay. It's available free to all registered users who encounter certain situations during the course of their online auction dealings. (Of course, an auction site's coverage applies only to transactions made through its site.) To follow is an overview of what online auction users should know about the ins and outs of insurance.

It's Not Everywhere
Although it can be a valuable service for users who purchase high-end items, insurance hasn't quite caught on yet. Amazon.com Auctions and eBay are the only two mega-sites that provide auction insurance; Yahoo Auctions doesn't. A lesser-known auction site, iCollector.com, which specializes in fine art and upscale antiques, offers something called an iGuarantee, which is, essentially, insurance.

Beyond the auction sites themselves, WebTradeInsure provides access to insurance coverage for online auction transactions, and works with several of its "approved" sites, such as eBay, Yahoo Auctions, Amazon.com Auctions, and boxLot. The company offers two types of insurance: credibility (up to $10,000) and transit (up to $25,000).

The bottom line: Almost any online auction site offers customer service or information about online fraud, but not many actually are willing to insure your transactions.

Coverage Varies
Under its Lloyd's of London coverage, eBay will reimburse you as much as $200, with a $25 deductible, if Lloyd's deems that you are a victim of fraud once they investigate your claim. This means that eBay's coverage applies only to expenditures of more than $25. For smaller claims, it's still between the seller, the buyer, and SafeHarbor, that is if the latter gets involved.

At Amazon.com Auctions, you can receive as much as $250 of the listing's final closing price. If you used the site's Amazon.com Payments system, your coverage leaps to $2,500 with no deductible. You are limited, however, to a lifetime maximum of three claims.

iCollector.com's insurance is also underwritten by Lloyd's. Arranged through an online outfit called SafeOnline, the site's policy covers items bought through iCollector.com for as much as $50,000. Where appropriate, the site also will provide for item replacement, and cover the additional shipping costs involved in returning rejected items to the seller for as much as $500.

Is It Endorsed?
Some online auction users advise that it's best to be sure that a site offers some kind of insurance or fraud protection, while others say that the lack of a formalized program shouldn't necessarily deter folks from placing bids. This disparity of opinion could change, however, as the idea of insurance takes hold. For example, some credit card companies have extended their guarantee to purchases made at online auction sites. Check with your credit card company for details.

How It Works
The transaction in which you suspect fraud must have resulted from a completed auction or sales transaction on a particular site, and you must agree to the terms and conditions of filing a claim. Submission of a false claim violates federal and state criminal fraud laws and could result in serious criminal penalties.

For starters, you'll be asked to provide specific information about both yourself and the transaction, such as your name, address, site ID, and telephone number. You also will need to know the unique transaction or auction number from which the suspected fraud resulted. All of this information is entered in an onscreen form at the auction site. A representative of either the site or the insurance carrier might contact you for more information while they investigate the report.

Here is the claim filing process that eBay uses:

1. Register your complaint.

You must register a complaint in the Fraud Reporting System within 60 days of the auction's close.
Once you do so, the Fraud Reporting System will contact the seller informing him or her that you have filed a complaint.

2. Try to resolve the complaint.

You and the other user have 30 days to resolve the transaction via the Fraud Reporting System.

3. Update the complaint status.

At the end of 30 days, return to the Fraud Reporting System to file or delete your complaint.
If you file your complaint and are eligible for insurance, you will receive information on obtaining insurance.
If you delete your complaint, your complaint against the other user will be removed.

4. Send your insurance claims to cynoSure Financial, a claims administrator acting on behalf of certain underwriting syndicates at Lloyd's.

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