Coverage is available and should be recommended
By Phil Zinkewicz
We've all read the identity theft horror stories involving people who have had their Social Security numbers or credit cards stolen. They have to spend one or two years and a good deal of out-of-pocket money in straightening out the mess that resulted. Sometimes, these people have also lost a good portion or all of their life savings. But here's one story that raises identity theft to new levels. This recently appeared in The Morning Call, a Pennsylvania-based publication.
Gertrudis Rivera-Alicea of Allentown, Pennsylvania, is not sure exactly when and how his Social Security number and birth certificate were stolen. But he believes it was about 25 years ago when, as a young man, he worked as a fruit picker in the orange groves of Florida. A Puerto Rican native and, therefore, a U.S. citizen, Rivera-Alicea had to give his Social Security number and show his birth certificate every day when going out to the fields.
In any case, someone did get this information and, as a result, Rivera-Alicea suffered years of financial frustration as he was hounded by the Internal Revenue Service for not reporting earned income, and had his credit history strewn with reports of late payments to accounts he never opened, according to The Morning Call story. Nightmare enough for any person, but his real visit to Elm Street came this past March when he was notified he was being sued for child support by the maternal grandfather of an 11-year-old girl born to a woman he'd never met.
According to the report, the Illinois Department of Public Aid notified Rivera-Alicea's current employer this past February that every month, $145 was to be deducted from his pay for child support. The case became extremely complex, with Illinois investigators discovering that Rivera-Alicea and another man named Juan Contreras, an illegal alien, shared the same identity. The IRS eventually discovered that two men were using the same SS# for tax filings. Contreras has allegedly been using Rivera-Alicea's identity to obtain a driver's license, credit cards and bank loans.
Now that Contreras has admitted his wrongdoing, the Rivera-Alicea case has arrived at a happy ending, although it was a long time in coming. But this type of extreme example shows how identity theft, which is becoming more prevalent as information sharing continues, can almost ruin someone's life.
This case of identity theft involved only one perpetrator and one victim. Professional miscreants have now moved into the identity theft business in a big way. Recently, it was reported that the former manager of a Hollywood Video store in Mount Vernon, New York, has pleaded guilty to a felony charge for passing personal data about his customers to a major identity theft ring. District Attorney Jeanne F. Pirro said that the former manager faces up to four years in state prison. Prosecutors said that the stolen information was used to set up Internet charge accounts and purchase more than $100,000 in Sony electronics, Gateway computers and other merchandise that was then resold to a store in the Bronx.
Want more? Late last year, the United States Attorney for the Southern District of New York and a representative of the FBI announced the arrest of a defendant in what the authorities said was the largest identity theft case in U.S. history. The U.S. has charged the defendant and others with wire fraud and conspiracy in connection with a "massive identity theft" scheme that spanned nearly three years and involved more than 30,000 victims. The officials said the defendant worked out of a communications company in Long Island, which provided the computerized means for banks and other entities to obtain consumer credit card information from the three commercial credit history bureaus--Equifax, Experian and TransUnion. The defendant had access to the confidential passwords and codes that belonged to these companies, and he had the ability to access and download credit reports himself, according to officials.
The accused then went on to sell the credit reports of tens of thousands of names for in excess of hundreds of thousands of dollars. The defendant was also able to compromise companies such as Ford Motor Credit Corp., Washington Mutual Bank in Florida and Washington Mutual Finance Co. in Crossville, Tennessee. The number of victims in this case exceeds 30,000 and, to date, the government has been able to confirm more than $2.7 million in financial loss. Consumers whose credit reports were stolen in this scheme have reported many forms of identity fraud, including depletion of savings, unauthorized use of credit cards and ATM cards and the assuming of "identities" by non-authorized individuals.
Earlier this year, the Federal Trade Commission (FTC) said that Consumer Sentinel, the complaint database developed and maintained by the FTC, received 380,103 consumer fraud and identity theft complaints. Consumers reported losses from fraud of more than $343 million.
Coverage parameters
The insurance industry has come to recognize the need for special protection against identity theft. Some insurers have begun offering identity theft, either under the traditional homeowners policy or as endorsements. Recently, the Insurance Services Office (ISO) introduced a multi-state form, HO 04 55, Identity Fraud Coverage Endorsement, expanding coverage under the HO 2000 base policy forms to help with expenses related to recovering from identity theft. Specifically, the form allows a maximum of $15,000 to handle:
* Limited amount of income loss due to time taken to meet with authorities or attorneys
* Defense of lawsuits filed against the insured by defrauded creditors
* Payment of certain loan application fees
* Long distance telephone expense to businesses, authorities, financial institutions
* Notary and certified mail costs related to paperwork to deal with fraud damage
The $15,000 is a maximum, per-occurrence limit for any fraudulent incident discovered during the policy term.
In addition, the American Associa-tion of Insurance Services (AAIS) is preparing to file "Identity Fraud Expense Coverage" endorsements, rules and rating information under the AAIS Farmowners, Homeowners and Mobile-Homeowners programs. The filings carry a proposed effective date of March 1, 2003. The AAIS said that equivalent endorsements will be made available to non-AAIS companies for filing on their own.
The new endorsements cover expenses, including lost earnings, incurred by individuals as they spend time and money rectifying personal records after being victimized by identity thieves. The covered expenses include costs for producing, notarizing and distributing documents; telephone charges; research fees; loan application fees; and attorneys' fees. Lost earnings are covered to $250 per day per insured or $5,000 total.
Survey says
Recently, Fireman's Fund, in conjunction with Harris Interactive Market Research, conducted a survey of homeowners, the purpose of which was to find out how much insureds know about their homeowners coverage. Part of that survey addressed identity theft. The survey found that 97% of homeowners queried had heard about identity theft, and 90% are at least "somewhat concerned" about being a victim of identity theft. Nationwide, homeowners reported being a victim of identity theft 12% of the time, while this number jumps to 16% for California residents. Likewise, more than 35% of California residents say they know someone who has been a victim of identity theft, compared to 22% nationwide.
The survey also found that homeowners with higher priced homes were more likely to be victims of identity theft than those with lower priced homes. Almost eight in 10 homeowners believe they know what they can do to lessen the chances of having their identity stolen. Over 70% of homeowners say that they have taken steps to lessen the chances of having their identity stolen, and that number jumps to over 80% for California homeowners.
Only 11% think that their homeowners insurance policy would cover them for money lost due to identity theft, while over 60% seem unsure. The survey showed that less than 10% think their homeowners insurance policy would cover them for expenses incurred in recovery from identity theft.
Other findings of the survey include:
* More homeowners under 40 years old believe that they know what to do to help prevent identity theft (87%) than do homeowners 40 and over (74%).
* More homeowners with an annual income of $150,000 or over believe they have taken steps to prevent identity theft (87%), than do homeowners with income of less than $150,000 (69%).
* More male homeowners strongly agree that the government should take steps to help prevent identity theft (46%) than do female homeowners (36%).
* More female homeowners think that they know how much time and money it would take to recover from identity theft (46%) than do male homeowners (37%).
* More homeowners 60 years old and older report being the victim of identity theft (22%) than do those under 60 (11%).
Michelle C. Kenney, senior director of personal insurance and underwriting, is responsible for Fireman's Fund's nationwide underwriting philosophy and practices, including analysis of risks, development of insurance products, and management of claims and coverages. She says that, currently, most homeowners insurance doesn't provide coverage for identity theft. However, she adds, more and more insurers are beginning to recognize that there is a need for such protection. "We're not talking about insuring whatever money has been stolen in the identity theft," she says. "We're talking about coverage for expenses incurred while the victim is trying to get out from under--telephone calls, lost time from work, special mailings, notarizing statements, etc. Many people don't realize how time-consuming and expensive that process can be."
Two levels of coverage
Kenney says that Fireman's Fund is offering two levels of coverage for incurred expenses in identity theft. One is the company's standard policy, which offers protection of up to $15,000, similar to the ISO policy form. The other is Fireman Fund's Prestige Homeowners policy, which offers an endorsement of up to $25,000. "Most of the other products being offered by carriers have limits of $5,000 or $10,000," says Kenney. "We're offering the higher limits, and we're looking at the upscale insureds simply because they appear to be a primary target of identity thieves."
The Fireman's Fund executive says that most consumers don't really know what's covered in their homeowners policies, not just in the area of identity theft, but in areas such as replacement costs for damaged property. "We all have a responsibility in improving the education process," says Kenney. "Insurers have to talk to their producers, producers have to talk to insureds, and consumers should know what questions to ask."
Meanwhile, identity theft insurance appears to be a product whose time has come, according to Kenney. "It's a relatively new phenomenon," she says, "and we have to try to figure out the next level." *
Nationwide, homeowners reported being a victim of identity theft 12% of the time, while this number jumps to 16% for California residents.
HOW TO PROTECT AGAINST IDENTITY THEFT
Fireman's Fund offers the following advice to consumers to help prevent identity theft and also what to do about it should one become a victim.
* Zip your lips. Don't give out personal information or important numbers such as Social Security or credit card numbers to strangers who call on the telephone or show up at your front door. Before you provide any personal information, make sure you are dealing with a legitimate person or company.
* Give strangers the cold shoulder. When you make credit card or debit card purchases, phone card calls or use an ATM, look around to make sure no one is peering too closely at your activity. Screen the numbers on your cards from those nearby.
* Shred, shred, shred. Don't throw bank statements or any other sensitive information with personal account numbers away without first tearing them up. This includes pre-approved but unwanted credit cards that might come in the mail. Otherwise, "dumpster divers" could start using that information for themselves.
* Ignore Internet queries. Don't give your Social Security number or other identifying information to unsolicited e-mail spam or vendors.
* Check your credit reports and other financial information regularly. Make sure everything is accurate and everything is where it should be. Order a copy of your credit report every year. Here are the three major credit reporting agencies to contact. You may be charged for a copy of your report.
Equifax - www.equifax.com
To order your report, call: (800) 685-1111or write: P.O. Box 740241, Atlanta, GA 30374-0241
To report fraud, call: (800) 525-6285and write: P.O. Box 740241, Atlanta, GA 30374-0241
Experian - www.experian.com
To order your report, call: (888) EXPERIAN (397-3742)or write: P.O. Box 2104, Allen, TX 75013
To report fraud, call: (888) EXPERIAN (397-3742)and write: P.O. Box 9532, Allen, TX 75013
TransUnion - www.transunion.com
To order your report, call: (800) 916-8800or write: P.O. Box 1000, Chester, PA 19022
To report fraud, call: (800) 680-7289and write: Fraud Victim Assistance Division, P.O. Box 6790, Fullerton, CA 92834-6790
* Keep careful records of all financial accounts and store them in a safe place. This includes monthly bank or brokerage statements, returned checks, credit card and debit card receipts.
* Place passwords on all credit card, bank and phone accounts. If you are asked your mother's maiden name, use a password instead.
Advice for victims
The following recommendations are available online from the Identity Theft section of the U.S. Department of Justice Web site (www.usdoj.gov).
* Contact the Federal Trade Commission (FTC). The FTC is responsible for receiving and processing complaints from consumers who believe they have been victims of identity theft. You can reach the FTC by toll-free telephone (877) ID THEFT or TDD at (202) 326-2502, online at the identity theft Web pages of the FTC at www.ftc.gov, or by mail to: Consumer Response Center, FTC, 600 Pennsylvania Avenue N.W., Washington DC 20580.
* Contact your creditors. Make sure all creditors are notified that someone is fraudulently using your personal data. Cancel your accounts, place stop payment orders on outstanding checks and change your ATM card account and PIN number.
* Contact the major check verification companies. If your checks are stolen or phony bank accounts have been set up in your name, contact one or more of the major check verification companies:
CheckRite - (800) 766-2748
Chex Systems - (800) 428-9623
CrossCheck - (800) 552-1900
Equifax - (800) 437-5120
National Processing Company - (800) 526-5380
SCAN - (800) 262-7771
TeleCheck - (800) 710-9898
* Contact other agencies as necessary. You may also need to contact the Postal Inspection Service, Social Service Administration (800) 269-0271) or the Internal Revenue Service (800) 829-0433).