Online Security, a global provider of computer forensics and information technology risk mitigation since 1997   Original Source:    http://www.signonsandiego.com/news/business/20030820-9999_1b20identity.html Identity theft insurance can cover victims' costs Author:  Bruce V. Bigelow Karen Barney's financial nightmare began on Oct. 12, 2001, when the La Mesa woman opened a $766.97 bill from Nextel for cellular phone accounts she never opened. Barney soon discovered that a thief was using her Social Security number, driver license number and other personal information to buy cell phones, pass fraudulent checks and make credit card purchases in her name. She's hardly alone. Roughly 7 million Americans fall victim to such identity theft each year, according to a recent survey by Gartner, the Stamford, Conn., market research firm. As a result, a growing number of insurance companies have begun offering coverage that helps reimburse consumers for the cost of clearing their names. At least six companies now offer such protection. After a deductible of $100 or more, identity theft policies typically reimburse consumers for the costs they incur in placing phone calls and mailing notarized documents to restore their credit rating. Some policies also cover related legal costs. Such coverage is usually offered with homeowners or renters policies, according to the Insurance Information Institute. The policies typically cost between $15 and $25 a year and provide coverage that ranges from $15,000 to $25,000. But such coverage is only remedial, and does nothing to prevent identity theft from occurring in the first place, said Linda Foley of the Identity Theft Resource Center in San Diego. "The problem with identity theft insurance, No. 1, is what is the deductible?" Foley said, "And No. 2, what does it cover? Sometimes it's just cheaper to repair your reputation yourself." Still, "It's a really interesting concept," said Barney. She and her husband, Daniel, are still working to clear their credit history – almost two years after they filed their first theft report. Fraudulent charges made in their name still occur sporadically, and Barney said she maintains frequent communications with the three major credit bureaus, Experian, Equifax and TransUnion. "It's not going away by any stretch of the imagination," she said. The Federal Trade Commission ranks identity theft as consumers' top complaint, and a recent survey by Gartner shows the number of cases in 2003 represents a 79 percent increase since February 2002. To Gartner analyst Avivah Litan, identity theft is a crime wave that has been aided and abetted by the explosion of computer-based technologies. "When people steal credit reports now, they don't just steal one or two," Litan said. "They steal 30,000 or 50,000, which enables them to fabricate identities by the thousands." Unlike credit card fraud, which typically involves stolen bank cards, identity theft involves the use of crucial personal information to take over a consumer's entire identity. Such thieves then use the stolen identity to get loans and credit lines – and go shopping. Financial Insights, another market research firm, estimates that U.S. losses from fraud-related identity theft will amount to $4.2 billion this year – and are projected to increase to $8.2 billion by 2006. Most of those losses are borne by banks, credit card issuers and the merchants who deliver products. Consumers bear a relatively small fraction of the cost, although the hassles can be enormous. For the financial industry, such losses have become a cost of doing business. "The sad truth is that banks and credit card issuers aren't that interested in fighting the problem," said Litan, the Gartner analyst. The toll for consumers is a different story, however. "For the individual consumer, the big cost is in recovering your good name and there is no easy process in place to do that," said Mitch Dembin, a former federal prosecutor in San Diego. The average identity theft victim spends 175 hours trying to repair their credit history, according to the FTC. About 30 percent incur out-of-pocket expenses of $740 per person, with 12 percent spending more than $1,000. The Insurance Information Institute advises that consumers interested in obtaining identity theft coverage should check their homeowners policy to see if they are already covered. Chubb, for example, began offering identity theft coverage to its customers at no extra cost more than two years ago, said Mark Schussel, a spokesman for the New Jersey-based insurance group. "Our independent agents originally turned us on to the potential need because it was an emerging risk that they were hearing about from their own customers," Schussel said. Chubb's $500 deductible policy provides reimbursements for taking time off from work, reasonable attorneys fees and the costs of making phone calls and filling out paperwork and notarizing documents. Another insurer, New York-based AIG, provides its identity theft coverage as part of an employee benefit package, said Ty Sagalow, chief operating officer of the company's e-Business Risk Solutions. By selling it on a group basis, Sagalow said AIG can offer its identity theft coverage at a price that ranges from 50 cents to $5 a person. Other insurers offering coverage are Farmers, Travelers, Encompass and Amica, although some carriers do not yet offer coverage in California.