What is identity theft insurance?

Restaurant busboy Abraham Abdallah made global headlines in 2001 when he was accused of stealing the Social Security numbers and other key identity data of more than 200 of the “Richest People in America” listed in Forbes magazine. The fraudster duped several credit score companies, such as TRW, Equifax and Experian, into providing credit reports on the wealthy individuals. After that, he used the confidential information to pose as his victims and gain access to their accounts at brokerages. In doing so, Abdallah stole millions of dollars from the rich and famous, including television superstar Oprah Winfrey, CNN founder Ted Turner, movie director Steven Spielberg, and Berkshire Hathaway’s Warren Buffet.

Abraham Abdallah’s duping of America’s most wealthy individuals is one of the most famous identity theft cases of all time. While this case was exceptional because of the individuals and the dollar amounts involved, it also highlighted the reality that identity theft is a risk we all shoulder and an exposure we all bear some responsibility to mitigate.

What exactly is identity theft?
Here are a few definitions:

The Merriam Webster dictionary defines identity theft as: “The illegal use of someone else’s personal information (such as a Social Security number) especially in order to obtain money or credit.”

Similarly, the Insurance Information Institute (III) defines identity theft as: “The act of taking personal information – like Social Security numbers or bank account numbers – and using it to ‘impersonate’ someone for the purpose of stealing.”

The III goes on to explain that identity theft crimes are usually financial in nature, but can also be used in more elaborate schemes, such as: to rent a home or take out a mortgage with a stolen identity; to get a job; and to take out an insurance policy.

How do criminals steal identities?
Oftentimes, criminals don’t have to do any work to steal your identity. They can sit on a train or a bus, pick up the wallet you accidentally left on the seat, and voila – your credit card is theirs. Some thieves also use old-fashioned methods like ‘dumpster diving,’ where they will rummage through your garbage to find any thrown-out documents that might contain sensitive, personal information. That’s why people are advised to at least shred any important documents before throwing them in the trash.

Other identity theft methods include, but are not limited to: stealing hardware like laptops and mobile phones (which all include lots of personal data); telephone scams in which fraudsters will pose as financial institutions to try and coax personal information out of people; and online phishing scams whereby thieves send email enquiries to try and trick people into entering their personal information online.

What is identity theft insurance?
As the name suggests, identity theft insurance has been designed to cover some of the costs related to identity theft. For example, a victim might be able to use the policy to cover the cost of legal help or to reimburse the money spent on repairing their credit reports and reclaiming their financial identities. The recovery process after an identity theft can sometimes take years, often leaving the unfortunate victim in difficult financial circumstances.

How do you get identity theft insurance?
Those who decide they want identity theft insurance have a number of options to choose from. Lots of homeowners’ and renters’ insurance policies provide a limited amount of protection for loss of cash or credit cards. If it’s not already included in these policies, consumers can ask their brokers to try and get the coverage added on to their policies as a rider or endorsement. It is also possible to buy standalone identity theft insurance.

Which insurers offer the coverage?
Most insurers offer some sort of coverage to protect against identity theft risk. As the III states: “Many companies now provide insurance products that not only cover costs associated with identity theft incident recovery, but also provide ‘restoration’ services to make the process easier and faster.”

A few examples of insurers that offer the coverage include:

• Nationwide offers ID theft protection for as little as $45 a year. The insurer will reimburse $25,000 for covered out-of-pocket expenses and will provide policyholders with 24/7 access to a team of resolution specialists. The coverage must be purchased through a Nationwide auto, home, renters, condo or RV policy.
• Liberty Mutual’s identity fraud expense coverage will provide coverage up to $15,000 per occurrence and $30,000 per policy period for covered perils. Again, the insurer offers the coverage as an add-on to a homeowners’ policy, priced at around $35 a year.
• Esurance offers identity theft insurance as an add-on to its homeowners’ policy. For as little as $3 a month, homeowners can choose coverage limits of up to $10,000, which will also get them access to services like monthly credit report monitoring and an experienced ID theft advisor.

Identity protection services
The rise in identity theft, driven partly by cyber-savvy criminals making the most of the modern tech boom, has resulted in a surge in demand for identity protection services. Companies that offer identity protection services provide additional features on top of insurance, such as monitoring for suspicious uses of your information, or dark web monitoring.

One of the most famous identity protection firms is Generali Global Assistance, part of the Europ Assistance Group and Generali family. According to Generali Global Assistance’s first global consumer survey about cybersecurity issues, which was published early in 2019, almost 50% of consumers believe companies and institutions are not doing enough to protect their personal information.

“As consumer awareness grows, insurance companies and brokers have opportunities to educate their customers and build trust,” commented Paige Schaffer, president and COO of Generali Global Assistance’s Identity Protection Services Global Unit. “Based on our findings, many consumers are looking for a solution that monitors for threats to their personal information and secures it in the event of an attack without much input. While there are many solutions available to meet those needs, being truly safe online requires a combination of both services and a commitment to safe browsing practices.

“Insurers and brokers can proactively protect data by offering identity protection services, which not only builds trust with the consumer, but also protects [the insurer or broker] by mitigating the cyber risk. They can also work to educate their customer base, especially around some of the basics like regularly updating passwords and digital credentials. I also think insurers and brokers can reiterate that they’re acting on behalf of the consumer. By offering something like identity protection services, they can extend their brand and increase the touch points, and therefore the trust, they have with their customers. This is a real opportunity for insurers and brokers to really beef up their brand as a company that’s looking out for consumers.”