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Identity Theft Coverage Gives Carriers the Edge

Ed McKinley July 2007

Identity theft, long the bane of IT departments, is also providing insurance companies with opportunities to offer a new kind of coverage and score some marketing points at the same time.

Carriers are hiring third-party services to restore policyholders' stolen identities. In general, here's how it works: The victim calls the insurer to report the ID theft. After establishing the validity of the claim, the carrier transfers the caller to the vendor's call center. The third-party vendor swings into action, drawing upon relationships with credit rating agencies and other institutions to refurbish the victim's credit. Meanwhile, the insurer can track the case until closure.

The practice has become entrenched enough that the one vendor, Steve Christenson, president of Phoenix-based Identity Theft 911, can recite a customer list that includes Metropolitan Life Insurance Co., Liberty Mutual Insurance Co, the Chubb Group of Insurance Cos., Fireman's Fund Insurance Co., California Casualty Group, Amica Mutual Insurance Co., the Commerce Insurance Co., American National Property and Casualty Co., State Auto Insurance Co., Grange Mutual Insurance Co., Michigan Millers Mutual Insurance Co., Motorists Mutual Insurance Group and Country Insurance & Financial Services.

Yet, identity restoration remains new enough to provide a competitive advantage, says Matt Cullina, director of product management at New York-based MetLife. "From a marketing perspective we still have an edge," he says. Moreover, he adds, it's a "hot button" topic among consumers.

And little wonder. Some 28% of identity theft victims are unable to restore their identities on their own after a year of trying, according to a survey by Nationwide Mutual Insurance Co., Columbus, Ohio. Victims spend an average of 81 hours trying to resolve their cases and pay an average of $587 in expenses, including legal fees and lost wages, the poll indicates.

"One of our officers here at Nationwide was a victim of identity theft and realized the hours and hours that went into resolving and rebuilding his identity," notes Deidre Abbitt, the company's ID Theft product manager. Nationwide provides the service with help from a product called ID Theft Assist that's administered by Washington, D.C.-based Worldwide Assistance Services Inc.

Most victims aren't held responsible for fraudulent charges, but 16% of those surveyed by Nationwide report paying an average of $6,440 to cover some or all of the thief's purchases, the company says.

Perpetrators of fraud used victims' identities to spend an average of $3,968, and people don't realized they've become victims for an average of five-and-a-half months, the Nationwide survey shows.

Those are hardly isolated instances, says Kirk Voisin, Worldwide Assistance vice president of sales and marketing. More than 100 million Americans have felt the effects of identity theft, according to the San Diego-based Privacy Rights Clearinghouse.

Nobody's come up with a surefire way to stop such thefts, but restoration services address a key part of the fallout from the thievery: frustration.

MINIMIZING FRUSTRATION

Some 92% of victims say they were frustrated by the hassles of trying to rebuild their identities, Nationwide says. Sources of frustration, according to the survey, included uncooperative institutions, loss of money, damage to credit ratings, the emotional toll, feeling of disbelief, paperwork, phone calls, closing and opening of accounts, and the mystery of how thieves obtained the personal information.

When MetLife surveyed the victims their service had aided, the policyholders named "minimizing frustration" as the most important aspect of the assistance, says MetLife's Cullina. That took precedence over the other two oft-mentioned benefits-saving time and saving money. Victims who try to smooth over identity theft on their own often take the wrong steps, take the right steps incorrectly or take the same steps repeatedly, the MetLife survey indicates.

MetLife launched identity theft restoration services in March 2005, says Cullina. By then, most major carriers were offering policies that reimbursed victims for expenses incurred while restoring their own identities, but Cullina says his company was the first to offer third-party restoration services built into homeowners policies at no additional charge to consumers. Last year, MetLife was also the first company to bundle restoration services with auto policies for no extra charge, Cullina says.

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