Identity theft continues to be the leading cause of U.S. consumer fraud. The victims are getting younger, and the scams are getting bolder. And although the marketplace is filled with identity theft insurance products, most are limited to covering out-of-pocket expenses and don’t include practical help to restore a person’s name and credit.
Anyone can become a victim of identity fraud. Complaints are increasing fastest among teens and young adults, the Federal Trade Commission reports, but ID thieves target people of every age. With almost 10 million Americans affected each year, identity theft has been growing quickly. The FTC estimates the total cost at almost $50 billion annually. So what do your clients need to know — and how can you protect them against this increasingly common crime?
We’re all at risk
Identity thieves steal personal information in many ways. Although a study released by the Better Business Bureau reports that lost and stolen wallets, checkbooks, and credit cards are the leading sources of ID theft, other common causes are dishonest employees and mail theft. Thieves often pick through the trash for pre-approved credit card applications. The risk of fraud can be anywhere — even professionals who prepare tax returns have been accused of claiming their own clients’ tax refunds.
In recent months, banks, online retailers, big brokers of consumer data, and federal agencies have revealed security breaches that have placed tens of thousands of Americans at risk for identity fraud. Online schemes are also a serious problem, costing consumers tens of millions of dollars through identity theft that includes email scams, computer viruses, and spyware programs aimed at collecting personal information.
The cost is bad enough, even though financial institutions usually are responsible for most stolen funds and charges. The time and hassle it takes to restore an identity and fix credit records can be far worse. The FTC says that in 2003 alone, identity theft victims spent almost 300 million hours resolving their problems. They often found the process confusing, frustrating, and time-consuming.
A growing market
As the number of ID thefts has grown, credit card companies, insurers, and others have begun offering coverage designed to protect consumers. Some identity theft insurance, however, is typically limited to out-of-pocket expenses. The coverage does little to help victims cope with lost time and stress from spending long hours to restore their identity records and clear up their credit information.
To help reduce this hardship, some insurance companies are combining personal identity recovery services with identity theft insurance to ease both the expense and aggravation of dealing with identity fraud. Some programs include this broader identity recovery coverage as a standard part of the policy. Identity theft insurance has also become a part of many homeowners’ and business owners’ insurance policies.
Identity recovery insurance for consumers helps guide ID theft and fraud victims as they repair their name and credit history. ID coverage can also provide assistance to key individuals in a business or organization. After all, if their time is wasted dealing with ID fraud, or their credit is threatened, it’s more than a personal problem. Their predicament can also affect their company’s results.
What to look for in a policy
It’s important to look for some key service features in any identity theft coverage. In addition to insurance protection, a program should include a toll-free help number and access to case managers when identity theft is confirmed. These specialists can help contact credit bureaus and do as much of the work as possible on behalf of your clients to re-establish their credit.
Checking credit is important, but that’s the easy part. Some identity recovery coverage includes access to private investigators who are skilled in fraud investigations. Small start-up case management firms that offer outsourced ID services to other insurers typically have employees with credit backgrounds, yet only about 20 percent of real ID fraud problems appear in a credit report.
Ask your insurance carrier specifically what resources it provides to back up its identity theft and recovery program.
Licensing requirements also differ from company to company and state to state. One company representative said their associates are only required to pay a state fee in order to sell the coverage. Another said the coverage is sold as an endorsement, or add-on, typically on property & casualty policies. At any rate, check with the carrier to make sure you’re fulfilling their individual requirements.
Our personal information is everywhere. We rely so much on computer-based data that it’s easier than ever to steal personal information — and harder to correct credit and identity records. Identity theft insurance can be an important product in a client’s portfolio, so know what to recommend before the problem hits.
Mark MacGougan, vice president for new product development with The Hartford Steam Boiler Inspection and Insurance Company, manages the company’s identity recovery insurance program. For more information, call 888-665-3688.