Who's who in the identity theft protection market
In the last several years, identity theft has become an increasing concern for Americans. A few high-profile instances of ID theft, such as Tiger Woods’ scrape in 2000, attracted ample attention.
Bandits still burgle banks all too frequently, but why bother when you can steal unnoticed? Some scam artists dumpster-dive for sensitive banking documents and some "phish" for passwords and account numbers online. All of them present hazards to the savings, credit and livelihood of innocent victims.
In response, insurance companies and others have developed products to address the risk of identity theft.
"Most aspects of your life are driven by your identity and you need to safeguard it," says Alex Tsetsenekos, Director of Product Development for Farmers Insurance Group, who helped developed "Identity Shield," which is offered by Farmers. "It's impossible to completely prevent identity theft," he says.
Tsetsenekos says that Farmers customers who have "Identity Shield" are encouraged to report any incident that may have compromised their personal information. For example, if they left their wallet in a restaurant and its contents could have been examined — or if their TV was stolen by a burglar, which leads them to wonder what personal information the thief may have observed or taken from their home.
There are four main ways to obtain identity theft protection:
- As an add-on to your current home insurance policy or, in some cases, your car insurance policy.
- As an extra benefit through your bank or other financial institution where you have an account.
- As a workplace benefit through your employer.
- As an identity theft protection plan that's not an "insurance policy."
Identity theft insurance
One easy way to secure identity theft insurance is to piggy-back coverage onto your home insurance policy as an endorsement.
Usually credit card companies cover fraudulent charges made by an identity thief to your account, and so insurance companies don’t need to cover those costs as part of insurance coverage. Policies generally cover your lost work time in correcting the problem, phone bills and legal fees.
For example, among some of the nation's largest insurers:
- Allstate offers an identify theft endorsement to home insurance policies. For about $40 per year and no deductible, you can add identity restoration coverage to your homeowners’, condo or renters policy and be reimbursed up to $25,000 for covered expenses such as attorneys fees, lost wages, loan application fees and incidental costs, like postage stamps and phone calls involved in restoring your identity. If your identity is stolen, a team takes care of the legwork to help restore your credit rating and good name.
- Allstate's endorsement also pays for the cost of hiring a firm to address your identify theft issues. The policy provides $2,000 to: fill out paperwork, such as police reports; issue a fraud alert to major credit bureaus, government organizations, financial organizations and credit card institutions; review your credit history to determine whether fraud has impacted your public records or accounts; work with the three major credit bureaus to restore the accuracy of your credit history; and notify and work with the department of motor vehicles, collection agencies and law enforcement.
- Farmers insurance offers the "Identity Shield" coverage as an endorsement to home, renters and condo policies. For $65 a year or under, Farmers offers monitoring of the Experian credit files of two people, restoration assistance with a "personal advocate" to walk you through the process of correcting your reports, up to $30,000 in coverage for restoration (everyone in the family is covered) and up to $1,500 for lost funds.
- Nationwide Insurance's identity theft insurance endorsement includes credit monitoring, unlimited access to your current TransUnion credit report and score, and access to "identity resolution specialists" who will, among other services, place fraud alerts in your credit files, report the ID theft to the FTC, assist in replacing identifying documents, and provide legal referrals and discounted rates for legal services. The endorsement costs $45 per year and covers up to $25,000 to reimburse costs associated with identity theft, which can include time lost from work, legal fees, loan reapplication fees, postage and long-distance calls.
- State Farm is beginning to roll out an identity theft endorsement to its customers' home insurance policies, which will be available first in Oklahoma and Ohio on Aug. 1, 2008, pending approval from the state insurance departments. It reimburses up to $25,000 in monetary expenses associated with the restoration of an identity and provides support designed to help the customer recover control of his or her identity. The annual cost of the endorsement is $25 per policy period (pending approval).
You may be offered identity theft insurance that is tacked onto to other financial products, such as your checking account. Depending on your bank, this could be offered for free or for a small fee, and generally has a small policy limit, such as $5,000.
Harder to find is a stand-alone identity theft insurance policy that's not associated with an existing insurance policy or account. Travelers offers a stand-alone identity theft policy that compensates you for lost money and time due to ID theft. But your choices also depend on where you live. For example, New York's Insurance Department has not authorized the sale of stand-alone or group (workplace) identity theft policies, period.
Identity theft protection products
LifeLock under fire
The ID theft protection market got more complicated in February 2008 when Experian, one of the "big three" credit bureaus, filed suit against LifeLock. Experian alleges that LifeLock is violating the Fair Credit Reporting Act by filing for fraud alerts on the behalf of clients who are in no imminent danger of identity theft. The credit bureau asserts that the cost of processing the hundreds of thousands of unnecessary fraud alerts is costing them millions of dollars.
LifeLock’s advertising is also under fire in the lawsuit on two counts. First, Experian contends that the company misleads consumers and does too little to establish that the services and goods they provide could be obtained independently by consumers for free.
And second, the lawsuit challenges LifeLock’s claim that its service makes identity theft "virtually impossible." Such claims, according to Experian, only account for new-account fraud (when ID thieves open new accounts in your name) and fail to account for computer hacking or other forms of identity theft.
Litigation is underway.
Identity theft protection companies offer a service that is not an insurance policy but is "guaranteed." Generally, these services charge a monthly or annual fee and take actions that you could take yourself (for free, if you want to spend the time):
- They place "fraud alerts" with the three major credit bureaus. These are messages on your credit report that instruct creditors to verify your identification before extending credit in your name. (You can activate these yourself by contacting the credit bureaus.)
- They instruct the credit bureaus not to release your credit report to a third party without getting your permission. (By law you can do this yourself but for a fee from the credit bureaus.)
- They have the credit bureaus send you a copy of your credit report. (You're entitled to one free report from each bureau annually, by federal law.)
- They request your name be removed from junk mail lists and pre-approved credit card offers, so you don't wind up with credit offers in your mail box that could be stolen. (You can do this yourself any time at OptOutPrescreen.com.)
Guarantees for these services range from $20,000 to $2 million; these amounts would be paid out to cover the costs of "restoring" your good name in the event of identity theft.
Identity theft protection companies may offer other services in addition to these basics. For example, LifeLock, whose founder Todd Davis proudly annouces his social security number in commercials, has a "WalletLock" service that helps you report and replace lost or stolen credit cards, driver's licenses, insurance cards and other documents. LifeLock also says it monitors databases looking for evidence that your personal information is for sale or that someone is using your name at a different address.
LifeLock's reputation was shaken when one person did succeed in "taking" the CEO's identity. Last year, a Texas man used Davis’s social security number to get a $500 payday-advance loan. Now, Associated Press reports that Davis is being sued by disgruntled clients who claim that he knew his service didn’t work because it hadn’t even worked for him! The plaintiffs are seeking class action status for the lawsuit; LifeLock has over 700,000 clients.
IdentityGuard offers the basic credit monitoring service and also says it scans "back alley" chat groups and newsgroups for evidence that your personal information is being traded.
A service from LoudSiren only places fraud alerts in your credit reports so creditors must contact you via your unique "LoudSiren Safe Phone Number," which you can forward to up to three phone numbers.
The credit bureaus themselves are getting into the act. Equifax offers monitoring of your three credit reports, notification of major changes to your reports, and $20,000 in identity theft insurance. Experian's "Triple Advantage" service monitors your three credit files and sends you e-mails alerts of major changes, with a $50,000 guarantee. TransUnion offers monitoring and notification too, but only of its own report on you, with $25,000 in ID theft insurance.
So, plain and simple: Anything that can be done to protect your identity, you can likely do yourself. But if you would feel more secure with the work (and financial backing) of professionals, ID theft protection programs do the legwork.