A personal response: homeowners insurers are adding identity theft coverage to policies.
One answer to the problem is insure the exposure. Several varieties of identity theft insurance have emerged and are being refined continually. American International Group and St. Paul Travelers have developed group insurance products that can be used as employee benefits or for the use/protection of customers (or both).
In personal lines, homeowners insurers also have responded to the situation. Relatively inexpensive endorsements (coverage built into the homeowners insurance form) for ID theft exposure are now available from many homeowners insurers. Insurance benefits available are in the form of incurred expense reimbursement, but no liability insurance, or coverage for any actual financial loss sustained by covered persons, is provided.
Almost all insurers providing some form of "identity fraud expense" insurance include coverage for lost wages (or lost earnings). For example, Chubb Corp.'s limit is $250 per day, to a total of $10,000; Cincinnati Financial Corp. covers $250 per day for a maximum period of 40 working days, whether incurred individually or consecutively and Encompass Insurance offers a limit of $500 per week for a maximum of four weeks.
The use of per-claim deductible amounts varies also. Some insurers use some type of "per event" deductible amount (Atlantic Mutual, $500; Cincinnati, $250), while others, such as Fireman's Fund, do not use a per claim or aggregate deductible.
The total limits for II) theft also vary. Grange Insurance Cos. offers limits ranging from $2,500 to $10,000; Atlantic Mutual offers limits of $25,000 as a single option, as do Chubb and Hanover Insurance Co.
Some insurers, such as Atlantic Mutual and Chubb, offer the coverage with no additional charge, while others require an additional premium: Cincinnati, $25: Montgomery Insurance, $25; State Auto, $40 and Travelers, $25.
A Good Defense
The following risk management steps may be helpful to clients and insurers in deterring identity theft.
* Check personal credit reports regularly. A federal law effective in December 2004 mandates free credit reports sooner or later in 2005, depending upon the state of residence;
* Shred all documents that contain credit card numbers, banking account information or any other personally identifying data or information as soon as possible alter verifying the accuracy of the information;
* Make sure your mail is secure. Post office boxes offer more security than single family residence mailboxes;
* Guard your Social Security number jealously. Its sole purpose is to secure individual benefits under the Social Security Administration. Question any request to use it other wise by merchants, educational institutions, etc;
* Destroy any receipts from ATMs, gas station purchases, restaurants or related transactions;
* Never reveal financial information related to you or your family over the telephone, or in response to computer requests (called "phishing").
* Destroy any solicitations for credit cards or bank cards arriving through the mail which contain personally identifying information; and
* Quickly review credit card statements when received for accuracy, and if incorrect, notify the sender in writing to preserve individual credit reporting rights.
ID theft is growing, and insurers are responding with several types of coverage. The easiest to access for most individuals may well be under a homeowners policy, although some employers are considering offering "group" ID theft insurance as an additional employee benefit. In reality, the best course of action is likely to be a combination of insurance and individual loss control measures.
Identity Theft Coverage by Selected Homeowners Insurers Insurer Expense Reimb. Limit American International Group $15,000-$100,000 per occurrence Atlantic Mutual Insurance Co. $25,000 per occurrence Allstate Insurance Co. $25,000 per occurrence Chubb Corp. $25,000 per occurrence Cincinnati Financial Corp. $25,000 per occurrence Encompass Insurance $20,000 per occurrence Fireman's Fund Insurance Co. $15,000 Fireman's Fund Insurance Co. $15,000 Grange Insurance Cos. $2,500 to $10,000 per occurrence Hanover Insurance Co. $25,000 per occurrence Hartford Financial Services Group $15,000 per occurrence Lexington Insurance Co. $15,000 per occurrence MetLife Auto & Home $25,000 per occurrence Montgomery Insurance $15,000 per occurrence Southern Guaranty $15,000 per occurrence State Auto Insurance Co. $15,000 per occurrence Travelers Property Casualty $15,000 per occurrence USAA $5,000 per occurrence Insurer Deductible American International Group Policy Ded. Atlantic Mutual Insurance Co. $500 Allstate Insurance Co. $0 Chubb Corp. $500 Cincinnati Financial Corp. $250 Encompass Insurance $100 Fireman's Fund Insurance Co. $0 Fireman's Fund Insurance Co. $0 Grange Insurance Cos. $250 Hanover Insurance Co. $250 Hartford Financial Services Group $250 Lexington Insurance Co. $100 MetLife Auto & Home $0 Montgomery Insurance $250 Southern Guaranty $250 State Auto Insurance Co. $250 Travelers Property Casualty $100 USAA $100 Insurer Premium Charge American International Group $25 per $10,000 limit Atlantic Mutual Insurance Co. Included in Atlantic Master Plan Allstate Insurance Co. $30 Chubb Corp. Included in Masterpiece Cincinnati Financial Corp. $25 Encompass Insurance $25 Fireman's Fund Insurance Co. Included in Prestige Premier Fireman's Fund Insurance Co. $15 for HO-3, HO-4 and HO-6 Grange Insurance Cos. $10 to $16 dependent upon limit Hanover Insurance Co. $35 Hartford Financial Services Group $24 Lexington Insurance Co. $25 MetLife Auto & Home Included Montgomery Insurance $25 Southern Guaranty $28 State Auto Insurance Co. $40 Travelers Property Casualty $25 USAA $25 Note: There may be some states in which ID theft coverage is not offered by an insurer from which it is otherwise shown to be available, due to statutory form approvals, or for underwriting reasons. This information is as of May 6, 2005. Source: Dawn Long
Potential ID Theft Incidents in 2005
Personal information marketer ChoicePoint said it accidentally sold information on approximately 145,000 U.S. residents to illegitimate business operations in California.
Leading discount shoe seller DSW said that customer names/correlated credit information from 108 stores had apparently been removed from a company database.
Lexis Nexis databases apparently were compromised for more than 30,000 individual customers.
Boston College announced that it had notified almost 120,000 alumni that individual Social Security numbers and addresses had been potentially compromised by an intruder.
Bank of America said that it had lost tapes containing the financial records of about 1.2 million federal employees.
Contributors: Dick Clarke is a senior vice president and Dawn Long is a personal lines supervisor at insurance broker J. Smith Lanier.
Identity Theft By the Numbers *
1 in 10 The number of identity theft victims in the United States
$50 Billion The cost of identity theft to businesses and victims
635,000 The number of consumer fraud/ID theft complaints made to the Federal Trade Commission
26% The amount that credit card fraud accounted for of all ID thefts
* In 2004 Source: Federal Trade Commission
* Insurers are responding to identity theft by offering both group products and coverage via homeowners policies.
* Some insurers offer the coverage at no extra charge.
* Identity theft policies typically cover only incurred expenses.
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|Comment:||A personal response: homeowners insurers are adding identity theft coverage to policies.|
|Date:||Jul 1, 2005|
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