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Image of someone holding a judges gabble with indeminty written out in letter blocks for the blog What is an Indemnity Claim and How to Decrease Them

What is an Indemnity Claim and How to Decrease Them

Decreasing indemnity claims is no less important to businesses than attracting new clients and increasing profit margins. Failing to protect customers can cost businesses financially, damage their reputation, and have legal consequences. With global fraud losses being close to $5.4 trillion recently, establishing a range of stringent protocols to combat such threats remains a premier business priority. What is an indemnity claim? Let’s break it down in today’s article.



  • What is an Indemnity Claim?
  • Defining Identity Theft and Chargebacks
  • How Customer Indemnity Claims Affect Business Reputation
  • Adopting Enhanced Identification Verification Software
  • An Ongoing Mission

What is an Indemnity Claim?

An indemnity claim is the process of a buyer claiming their payment back under the Direct Debit Guarantee. A bank must offer an immediate refund should a direct debit have been taken in error or without authorisation. The refund is made directly to the buyer's bank account.

One of the most common reasons for an indemnity claim is identity theft; unauthorised payments, incorrect payment dates, an unknown merchant and a cancelled contract with a merchant usually prompt other occurrences. 


Defining Identity Theft and Chargebacks

Identity theft is a method of cybercrime. Identity thieves operating through the web ‘steal’ personal details from other individuals. This could include names, addresses, credit card statements and numbers, bank account details, and other information specific to another person. 

Having obtained these details, a criminal is then able to imitate that person online, often using the information gathered to withdraw their savings and spend their money. In certain cases, a victim of identity theft may be able to claim compensation. 

If a business is found responsible for a data breach, it can be held accountable by law. Larger scale data breaches are often sufficient to destroy a business, as the costs to its finances and reputation are simply too high.

Chargebacks usually occur when a fraudulent purchase has been made via a payment card, and the actual owner of the card reports the issue. Although the card owner’s bank may deal with returning the money, the business handling the fraudulent transaction usually has to pay a fee to the debit or credit card company.


How Indemnity Claims Affect Business Reputation

Trust is a major issue in business, especially where money is concerned. In cases where two businesses offer the same service and price point, customers will look for other factors when deciding where to spend their money. Should one have a better reputation for managing the security, and payment processes of their customers than the other, that business is likely to earn more trade.

Furthermore, should an indemnity claim case become high profile, a business may be found to have been non-compliant in line with legal regulations, which may result in a fine or criminal prosecution. Naturally, any negative press a firm experiences will damage its reputation and its chances of attracting new customers and increasing revenue.


Adopting Enhanced Identification Verification Software to Reduce Identity Theft-Based Indemnity


Regarding how your business stores its client data, verification software is a solution specifically designed to reduce identity theft, minimising the number of indemnity claims and fraud-related chargebacks. 80% of financial service firms have undergone a breach that was most likely down to authentication weaknesses, so the benefits of identification software are clear.

infographic to show that 80% of financial service firms have undergone a breach that was most likely down to authentication weaknesses, for the blog What is an Indemnity Claim and How to Decrease Them

The best services available will naturally comply with all relevant regulations, be they local, national, or global. Such software should also clearly utilise the best verification methods for your specific business needs.


A Tailor-Made Solution

Our own Interpass software offers various solutions to meet the challenge of preventing identity fraud:


A three-point-check looks at personal identification, residency, and ID-validity. The software checks an individual’s date-of-birth against election, credit files, and banking data, as well as registered telephone numbers.

The same sources are utilised in checking residency, with the addition of court data. Finally, the validity of the information provided is checked against the deceased register and fraud databases. As a tool in preventing fraud, resulting in fewer indemnity claims and chargebacks, identity verification is hugely important.



The Interpass account verifier combats financial fraud by ensuring bank details are connected to the person identified. Checks are performed to link a person, their address, and their account details. The software is an extension of most verification methods in that both name and address are confirmed, including address history. Fraud indicators are also checked, including the age of the account and any unusual activity that may appear suspicious.



Businesses involved in monetary lending are subject to guidance from the Financial Conduct Authority (FCA). Companies need to demonstrate that they are acting within their client’s interests, by not loaning money that person cannot afford to pay back.

Interpass can run credit checks using a vast number of licenced external databases, in order to check the financial status of a client, and whether they meet the necessary affordability criteria. It’s rare to find access to the same number of databases elsewhere in the marketplace.


An Ongoing Mission

Reducing the chances of indemnity claims and chargebacks is an ongoing mission for businesses, law-makers, and software developers. As criminals invent new methods of stealing identities, businesses will need to meet threats head-on by introducing new guidelines and ever more stringent protocols. 

In turn, the most effective prevention software will continue to evolve and work alongside both parties in meeting whatever challenges tomorrow may bring. 

Discover the difference Interpass can make to your own organisation through our insights, or book a free demo with our friendly team of experts today.