Increased identity theft prompts new insurance products
By Phil Zinkewicz
These kinds of incidents, which are becoming
ever more frequent, have given rise to a
new kind of insurance product.
A pleasant little Hollywood film titled "The Bells of St. Mary's," starring Bing Crosby and Ingrid Bergman, includes the song "Aren't You Glad You're You?" Expressed in very light terms, the song is a testament to knowing yourself, your strengths and weaknesses and reveling in the fact that you exist. If that film were being remade today, the title of that song might well be something like: "Are You Sure You're You?" or even more accurately: "Are You Sure Someone Else Isn't You?"
These questions may sound fatuous, but the fact is that identity theft has become one of the greatest causes of concern in today's world of the Internet and the free exchange of information. Many Internet Web sites promise "security," in terms of keeping information they receive private, when purchases are made. But the truth is that most, if not all, Web sites cannot guarantee that knowledgeable computer devotees can't gain access to such information at will. Internet service providers themselves have been victimized by computer hackers who, just for fun, have managed to find ways to disrupt their services.
Those who do it "just for fun" are bad enough. They have cost these providers and their insurers millions of dollars in recent years. But what about the professional thieves? The havoc they can bring and, in fact, are bringing is significant, not just in terms of dollar loss, but also in terns of the aggravation and loss of time and money to those who are victimized.
Consider the following cases in point:
* A young man, living in New York, had a checking account with a major national bank. He also had a credit card with that same bank. One day, he was called by a computer firm to confirm the purchase of a computer, which he supposedly had ordered. He had made no such purchase. He was also called on that same day by his credit card company, which said they noted some serious activity in his account and wanted to "check into it."
Naturally being concerned, he contacted his bank and found that his checking account had also been depleted. His loss was roughly $1,500. While the credit card company had called because it recognized "irregularities" in his purchasing pattern, someone at the bank told him that there were no signs of fraud in his checking account withdrawals. Even though he had his checking account and credit card with the same bank, there was disagreement among the representatives of that institution as to whether there was, in fact, identity theft.
It took the young man almost two months to straighten out the matter, and he was lucky. It could have taken a lot longer. While he was made "almost" whole after the incident in terms of dollar loss, he has not been recompensed for the aggravation he endured or for his expenditure of time.
* In another incident, a man's name and Social Security number were obtained by a miscreant. Discover Card called him regarding some purchases he had allegedly made. He informed the credit card company that he did not even own a Discover Card and so could not have made the purchases. When he reported the incident to the police, they were nonplused as to how to handle an identity theft report and he has since had to deal with several government and credit card agencies to "retrieve" his identity.
In both of these cases, the victims are not out of the woods yet. They live in fear that, several years down the line, these fraudulent credit developments may come back to haunt them.
These identity theft incidents can take on even greater proportions. Recently, in what's believed to be the largest case of identity theft involving a New York state employee, a former state worker with the State Insurance Fund was found to have stolen personal information on hundreds of New Yorkers. She then fed the information into a New York City ring of identity thieves who used it to buy $100,000 worth of goods illegally. Among other items, the stolen information was allegedly used to obtain more than $70,000 worth of mail-order computers from Gateway. The attorney general's office says that they believe the employee who perpetrated this fraud had been involved in information theft for at least five years.
The $100,000 theft may not seem like much, but most people don't realize that when a fraud ring of any kind is discovered and money is missing, it is usually after considerably more money has already been ripped off. That $100,000 is probably only the tip of the iceberg and is only one example of how organized crime has moved into the identity theft arena.
These kinds of incidents, which are becoming ever more frequent, have given rise to a new kind of insurance product. It is a coverage that provides consumers with reimbursement, not only for the expense incurred when trying to unravel a complicated incident of identity theft, but also compensation for the time spent in the process.
Two companies that are currently offering this type of coverage are American International Group (AIG) and the Chubb Group. They are coming into the fray with products that address such identity theft, although each company is approaching this new market differently.
AIG, through a division called
AIG eBusiness Risk Solutions, has introduced AIG Personal Internet Identity Coverage (PIIC), a new insurance policy designed to help businesses and other organizations address the online privacy concerns of consumers by offering reimbursement of financial losses and legal assistance in the event of identity theft.
Basically, AIG is offering identity theft insurance protection to consumers through the financial institutions they deal with. "The increased occurrence of reported identity theft and hacking incidents has increased consumer apprehension about the online exchange of personal information," says Gretchen Hayes, president of AIG eBusiness Risk Solutions. "As a result, consumers are looking to businesses that conduct or facilitate online transactions or maintain their personal information online to provide a secure environment, and provide a solution in the event their identity is stolen. AIG PIIC combines insurance coverage with legal defense for certain actions that can help these businesses demonstrate their commitment to their customers' privacy concerns."
AIG PIIC provides insurance coverage that reimburses individual insureds for certain expenses related to identity theft, virus circulation and physical damage to computers that occurred as a result of their personal Internet use or wireless use. The policy provides legal defense for actions related to identity theft and reimburses costs associated with re-filing for loans, grants or other credit/debit instruments and payment of lost wages as the result of time off work to replace identity-related items. Additionally, AIG PIIC policyholders receive an identity theft claim kit and access to a dedicated toll-free help line to assist an insured in reporting the event to all required agencies.
The target market for this identity theft product includes: credit card companies and other financial institutions that use a customer's credit card, bank and brokerage account numbers for online transactions; Internet service providers, including companies that provide Internet access via television or wireless devices; credit information services providers that report credit irregularities resulting from an identity theft incident; employers managing their employees' personal information online through company systems; and associations offering personal insurance lines as part of member service programs.
Chubb is pursuing the identity theft issue from both the commercial and personal sides. Tracey Vistoli, assistant vice president at Chubb, says that the company offers identity theft insurance to private institutions. "Financial institutions are particularly vulnerable because they accumulate into their systems data that is useful to computer hackers and thieves," she explains. Vistoli says that Chubb is in the process of building a program that will address identity theft in non-financial institutions.
Mary Ann Avnet, vice president of marketing for Chubb, says the company is automatically including identity theft coverage in its homeowners policies, so far in about 46 states. With a deductible of $500, the coverage will provide up to $25,000 in coverage for each case of identity fraud. "The coverage includes costs of mailings, phone calls, hiring an attorney and other expenses," says Avnet. "It can sometimes take hundreds of hours to restore one's identity and even when it's over you're not sure it won't start up again. And these fraud perpetrators are not very actively prosecuted," she says.
Robert Bryant, president of the National Insurance Crime Bureau (NICB) notes that, even when insurance fraud is uncovered and "fraudsters" who perpetrated the crime are identified, it is very difficult to prove all the counts prosecutors bring against them and virtually impossible to recoup all the monies lost.
New technologies and the Internet have given new powers to white-collar criminals. These criminals who prey on today's technology-oriented community are not thugs with guns strapped to their shoulders, constantly saying "fagedaboutit," as in the movies. They are intelligent, determined individuals who know a good thing when they see it--identity theft. *