Preventing double identity: insurance agents can advise customers on ways they can decrease their exposure to identity theft.

There's a risk that insurance agents cannot afford to ignore. Identity theft is one of the fastest growing crimes in America--and the cost to the victim can be much more than many can imagine.

Identity theft can range from unauthorized use of a credit card to borrowing money in someone else's name or even assuming another's identity to commit a violent crime.

Sometimes, an individual's financial loss may be limited. For instance, the Truth in Lending Act limits customers' liability to $50 for unauthorized credit card purchases that appear on their monthly statements and are reported within 60 days.

However, purchases and loans made by identity thieves in another person's name often cannot be simply erased. Reversing bad credit can involve months and even years of correspondence with credit agencies. Victims may need to hire a lawyer, spend money on phone calls, faxes and postage. Victims also may forfeit income when they must stay home to deal with credit card companies, credit agencies, merchants, postal inspectors, police, the Department of Motor Vehicles, FBI and the Federal Trade Commission.

An Identity Theft Resource Center study, "The Aftermath--2003," estimates the average identity-theft case causes a victim to miss 607 hours of work. Considering that average out-of-pocket expenses are $1,495, the average total cost of identity theft comes to $16,000.

In addition, the number of identity theft victims continues to rise. Identity theft complaints to the FTC increased five-fold between 2000 and 2003. Gartner Research and Harris Interactive believe about seven million Americans were victims of some form of identity theft last year.

One of the schemes is called phishing, or sending emails that request updated billing information and threaten account termination. The e-mails contain links to Web sites that appear to be trusted service providers, financial institutions or online merchants. Gartner Research estimates that 57 million Americans experienced phishing attacks last year, costing banks and credit card issuers nearly $1.2 billion.

Insurance agents should warn affluent customers of their heightened risk. According to the ITRC study, the average amount of credit card charges related to identity theft in 2004 is $92,893. This is up from $18,000, as noted by the Privacy Rights Clearinghouse in 2000.

Public figures also should be concerned about this risk because much of their private information may be publicly circulated. If a criminal obtains enough personal information, he or she can clone an identity complete with a driver's license, Social Security card, loans, credit cards and phone accounts. In addition to being the target of financial fraud, victims can unwittingly be branded criminals.

Insurance agents also should discuss the vulnerability of their client's children. A survey of college students conducted for the Chubb Group of Insurance Cos. showed nearly half (49%) of more than 200 respondents receive credit card applications on a daily or weekly basis, and almost 30% of the students throw out credit card solicitations without destroying them. And 28% of the students rarely or never reconcile their credit card balances with receipts, meaning they wouldn't even know if someone had been fraudulently using their card.

Yet, there are steps insurance agents can suggest to their customers on how to decrease exposures. For example, searching monthly statements for unauthorized charges and destroying credit card applications are two primary ways to avoid identity theft. More tips can be found at www.usdoj.gov/opa/pr/2003/May/publicadvisory1.pdf.

As a result of rising costs and numbers of identity-theft cases, some insurance companies have added new policies or coverages to help protect their customers. In most cases, identity-theft insurance is sold as a rider to homeowners policies for an additional cost. Some insurers and credit agencies are selling stand-alone identity-theft insurance. In one case, up to $25,000 in identity theft coverage has been added to a homeowners policy without additional cost.

Typical identity theft insurance policies reimburse victims up to $10,000 or $15,000 for the cost of notarizing affidavits, phone calls and sending certified mall to law enforcement agencies, businesses, credit grantors and credit agencies. Standard coverage usually includes an allowance for earnings lost by taking time off from work and reasonable attorney fees.

Clearly, identity theft is a rapidly emerging risk. Agents and brokers are in a unique position to help their clients by ensuring that they recognize and understand the threat.

Andrew McElwee is executive vice president of Chubb & Son and chief operating officer of Chubb Personal Insurance, Whitehouse Station, N.J. He can be reached at [e-mail].