Identity Theft - It can happen to you  

As an industry, insurance has been sold to protect people from all kinds of loss. Most of that coverage is around insuring property against loss due to a variety of risks including theft. But in today's day and age, a new wrinkle has come to light. How do you protect against identity theft?

The public's growing anxiety over this type of crime has led to the development of new insurance products. They can help a person recover from identity theft and restore their good name. Identity theft insurance coverages are not formal "insurance" policies; rather they are "legal advisory plans" that provide identity theft information and advocacy. Coverage levels range between $5,000 and $30,000, but the benefits vary and do not provide reimbursement for fraudulent credit cards charges. Those charges must be resolved directly with the credit card companies. The average cost of an individual identity theft policy is about $25 a month.

Many carriers offer an identity theft coverage that reimburses policyholders up to certain amounts for legal fees, certain mailing costs, loan reapplication fees and phone charges in connection with the "loss." One carrier also covers lost wages of up to $500 a week, for four weeks, for taking time off from work to straighten out their affairs.

The average victim will spend $1,374 and 175 hours cleaning up their credit report, according to Bankrate.com.

There are three major types of identity theft insurance:

• Riders that can be purchased to add identity theft protection to existing homeowners, condominium, or renter's policies.
• Freestanding policies available for individual purchase.
• Identity theft insurance made available to workers by their employees.

The figures don't lie
The Federal Trade Commission (FTC) recently released a survey showing that 27.3 million Americans have been victims of identity theft in the last five years, including 9.9 million people in the last year alone. In a separate report, the FTC claims that more than half of all identity thefts where the method of theft is documented, are committed by criminals that have relationships with their victims, such as family members, roommates, neighbors or co-workers.

Identity theft happens when someone obtains a name, Social Security number, driver's license number or e-mail address, and then uses it fraudulently or criminally. Under this scenario, thieves can get personal information in many ways.

Identity information routinely consists of three elements:

• What is known, such as passwords and PIN (personal identification numbers).
• What a person has, such as credit or debit cards.
• What a person is, for example, your photograph, signature or fingerprint.

Once criminals have this vital information, they can impersonate you, obtain credit cards, transfer money out of your bank account, buy goods and/or worse.

Sadly, it is so simple to assume someone's identity today. Say someone makes a trip to the local hardware store and writes a check for $25, the check has a full name, address, maybe a phone number. It also will have the full name and address of the bank where the check is drawn and an account number. An individual may also be asked to provide a driver's license number, which in 19 states also doubles as a Social Security number. Thieves can also access work phone numbers and find out where someone is employed. The cancelled check can then be seen by hundreds of people from the time it is presented at the hardware store to the time it either is returned or sent to a check-clearing house where they presumably shred the document.

Another example pertains to golfing legend Tiger Woods, who testified three years ago that someone stole his Social Security number, applied for and received credit cards, then proceeded to ring up $17,000 worth of charges. The thief was finally apprehended when he aroused suspicion trying to purchase a used luxury car. In fact, TransUnion, one of the country's three major credit-reporting agencies, claims to receive in excess of 2,000 calls a day from identity theft victims.

What victims can do
To help victims of identity theft, the Federal Trade Commission (FTC) has developed an I.D. Fraud Affidavit providing standard means to dispute debts and credit problems left by identity thieves. Upon completion of the form, it is distributed to all creditors, most of whom have agreed to accept the form. In addition, the FTC developed an ID theft program in 1998, which affords consumers the chance to file complaints by calling the toll-free hotline at 1-877-IDTHEFT. The agency reports that complaints about identity theft have nearly doubled each year since its inception. These complaints are then entered into a secure database, the "Identity Theft Clearinghouse," which can be accessed by criminal law enforcers across the country.

The FTC also recommends the following measures to reduce the risk of becoming an identity theft victim:

• Guarding Social Security numbers and monitoring credit reports.
• Sign-up for a monitoring service, which will notify a person whenever someone applies for credit in their name or checks.
• Shred account documents before tossing them in the garbage.

The insurance industry continues to do its part by providing assistance to those victims of ID theft, through their offerings of specific coverages that can help them get back on their feet.

For now though, a pro-active prevention plan seems to be consumers' most viable course of action in combating identity theft.