12:37 PM
Rob Enderle
Rob Enderle

Opinion: Companies, Consumers Need Identity Theft Insurance

We also need services to help consumers get back on their feet.

As times change so do risks, and companies have historically provided benefits to address risks common to all employees.

One of the fastest growing today is the risk of identity theft, according to the Federal Reserve Bank of Boston, as it's projected to impact one in three people by the end of the decade.

Costing billions in damages, and weeks in lost productivity, identity theft has quickly moved beyond the scope of being just an individual problem. Like any other critical enterprise risk, identity theft has reached a point where it makes sense for companies to provide a corporate benefit to protect employees and the company itself.

The Impact Of Identity Theft

As anyone who has had his or her identity stolen can relate, the experience is both memorable and rehabilitating. It has become so pronounced that volunteer programs in some states, like California, have set up centers whose full-time role is to help people get back on their feet.

One of these organizations, the ID Theft Resource Center, recently identified a new and vicious type of theft: identity theft of children. It is a growing concern as an underage child is typically not in the market for credit lines, and so the problem could go undiscovered until the child applies for that first car loan or school loan. Their credit could be permanently damaged, creating serious problems for them much later on in life.

For adults identity theft can mean weeks and months of time spent closing bogus accounts, contacting creditors, and correcting credit reports. During this time, the adult, who is typically also someone’s employee, is clearly not focused on his or her job or much of anything else. Remember, until the ID issue is cleared up, their home may be at risk, their cars could be repossessed, and they may be unable to effectively pay bills. There will be no higher priority for them and, from the viewpoint of their company, they are just as unavailable, perhaps even more so, then if their home was lost or they had critically ill family member.

It is part of a corporation’s responsibility is to ensure the continued productivity of its workforce and healthcare benefits certainly speaks to that. But as identity theft can be just as debilitating as a medical problem it may be time for corporations to become proactive in addressing the identity risk issue, particularly since some of the largest, due to inept handling of customer information, are actually helping to create it.

Theft Statistics

In 2003, the Identity Theft Resource Center published a detailed report noting the impact of identity theft. Highlights include:

  • Fraudulent charges now average more then $90,000 per name used.
  • Nearly 85% of all victims find out about the theft only after they are negatively impacted.
  • The average time spent to correct the problems is 600 hours, at 40 hours a week that is 15 full time weeks.
  • The impact to victims is nearly identical to that of a violent crime.
  • The organizations that the victim must turn to often seem to treat that victim very poorly.

Identity thefts generally take any combination of three forms:

Financial Identity Theft: This is where a victim’s social security number is stolen and used to open a series of fraudulent accounts ranging from loans (particularly lines of credit and credit cards), leases (cars and apartments), checking accounts, and telephone services. It represents the most common form of theft according to the 2003 report.

Criminal Identity Theft: This is where the identity is stolen and used by a criminal in place of their own so the crime tracks back to the victim not the criminal. One example is someone using someone else’s name (because they “left their license at home”) when pulled over by a police agent for a ticket. The ticket is then issued in the victim's name and, when the criminal fails to appear in court, the warrant is issued to arrest the victim. This happens at about half the rate of financial theft according to the report.

Identity Cloning: In this scenario, the identity thief actually uses the victim’s identity to get paperwork, credit lines and pay rent. The thieves are often used illegal immigrants, felons, people avoiding judgments (like child support), and anyone hoping to leave their 'old life' behind. This happens about half the rate of criminal identity theft.

The center's report also highlights how easy it is to commit these crimes and walks the reader through the massively painful process of recovering from identity theft.

ITRC has an unwaiving policy to not endorse any product, service or goods.

What is particularly frightening is the rate of increase in all of the critical statistics. While it takes less time today to identify there is a problem (down from 12 to 18 months in 2000 to one to six months in 2003), the time to correct the problem spiked to 607 hours from 175. The average theft amount was $18,000 in 2000 and jumped to $93,000 by 2003. Out of pocket expenses related to identity theft rose from $808 to $1,495 with an additional $16,000 in average lost wages. Given two years have passed since the report was published it's safe to assume the current statistics are actually much higher.

The states where the most identity theft crime has been reported are California, Florida, Texas, Virginia, Illinois, Michigan, New York, Pennsylvania, and Washington. However, it may not be complete as some states are more aggressive in reporting when it comes to theft than others.

I am personally very concerned about this problem but, until recently, have not been able to identify a service that could provide companies theft recovery benefit services. On a personal level I subscribe to a credit protection service but it only insures that I will be alerted of a problem more quickly. I am still very concerned about the 600 or so hours it will take to correct things once I realize my identity has been stolen.

I also use a special credit card for online purchases to limit the risk factor, but with all of the information leaking from various otherwise trusted entities I’m well aware it's just the starting point of things a company can aggregate and provide to employees.

However, I recently did discover a company called Intelius. This firm is the only one I have found that not only provides $25,000 in identity theft insurance, but also provides a tool that will identify the theft while in progress and, potentially, prevent subscribers from being a victim. Intelius also provides, as part of the insurance benefit, a dedicated resource to help clients correct the problem if the theft takes place.

With volume pricing for a corporation expected to be below $5 a month per employee, and with over 10 million identity thefts at an estimated $5 billion dollars in consumer cost per year, the benefit services seems like a deal too good for companies to pass up.

If you are an employer, don’t you owe it to your employees to at least look into this? If you aren’t you may want to consider the issue of personal disaster because at the numbers and growth rate you’ll likely experience this problem or someone you know will and it’s always better to be prepared.

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