Technology and Cyber Risks

Identity Theft Insurance

Identity theft insurance is gaining significant attention as the number of direct and indirect losses from security breach and identity theft increases. The number and complexity of scams, both physical and online, is increasing dramatically. According to one report, at least 20% of individuals have been the victims of identity theft. In addition, corporate security breaches are becoming significantly more frequent as businesses rely more on electronic transactions, particularly online transactions. These trends are resulting in significantly increased interest in insurance as a form of protection against identity theft.

Much attention has been paid to the "cyber" aspects of identity theft, but corporate security breaches can occur from a wide variety of sources. Surely one of the most common is the loss or theft of corporate data by an employee. There have been many reports of laptop computers being lost or stolen with huge amounts of personal information. According to one source, there have been in excess of 260 significant security breaches involving well over 100 million personal records since the beginning of 2005.

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Identity theft insurance is a new and unproven area for coverage. Insurers are designing different approaches to providing coverage to see which works the best. At this time there seems to be three approaches insurers have taken to providing identity theft coverage:

Personal coverage. Personal coverage is provided directly to individuals, with each individual getting their own separate policy.

Group coverage. Under the group coverage approach, coverage is provided to a group of individuals on a group basis. Therefore, members do not get to choose whether they have the coverage or not.

Corporate coverage. Protection is provided to a corporation to cover obligations which might arise from security breaches which create identity theft issues.

Insurance coverage has primarily focused on providing protection for the costs of repairing credit. Most policies tend to cover the cost of restoring identity and repairing credit reports by reimbursing expenses such as phone, lost wages and attorneys fees. Individual insurance coverage for actual loss of funds is rarely available.

Liability insurance coverage for businesses found to be liable to third parties for one or more security breaches resulting in identity theft and damages is available on a very limited basis.

Mercator Risk Services provides insurance coverage for identity theft for small businesses in all 50 states. Please let us know your client.s needs and we will provide you with information and assistance with your particular situation or account, and identity theft coverage.

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