From the January 2007 issue of Investment Advisor • Subscribe!

Who Are You?

Are your clients protected from identity theft and fraud? Are you?

Warnings abound these days to protect your personal information--account and Social Security numbers, PIN numbers and passwords, all the bits and pieces of information that only you would know. These are the grist of identity thieves who, given the opportunity, would like nothing better than to become you just long enough to empty your bank account, raise money on your good credit, perhaps even sell your house out from under you and then go flying off somewhere on your credit cards to enjoy a time in the sun that should have belonged to you. Consumers are advised to be wary, to shred documents, to change passwords. Some do; many don't.

Undoubtedly you've spoken to your clients about the need for caution, about how best to ensure that they don't wake up one morning to find that their credit is shot and their balances reset to zero or worse, as happened to Michelle Brown. At a hearing before the U.S. Senate Judiciary Subcommittee on Technology, Terrorism, and Government Information in 2000, she testified that an identity thief had not only run up $50,000 in bills on her credit, but had also given Brown's name when she was apprehended for trafficking 3,000 pounds of marijuana. Brown had to prove her innocence repeatedly, even after the identity thief was sent to prison.

According to Chubb Insurance's Mark Schussel, affluent clients are particularly at risk by virtue of a tech-savvy lifestyle and high visibility. In 2000, Chubb added identity theft protection to its homeowner's insurance policies "at no extra charge" since, says Schussel, "we felt it was an emerging issue for our customers."

Chubb offers, in its Signature Suite product, not just coverage to clean up the mess caused by identity theft, but also a personal risk assessment by security experts. Typically, such policies provide a level of reimbursement for expenses incurred in restoring one's credit, such as lost wages, long-distance telephone calls, daycare and eldercare expenses, attorneys' fees, and perhaps even professional assistance in restoring documents, generating letters of dispute, and guidance on how to reclaim one's identity.

There's another facet to identity theft insurance that you may not have considered, however. Are your clients' businesses covered? AIG offers a business policy that your clients can offer as an employee benefit. Called Personal Identity Coverage (PIC), it provides, according to Nancy Callahan, VP of AIG's Identity Theft and Fraud Division, coverage to the employees, customers, or members of the policyholder for the consequences of identity theft. Even if a client firm doesn't handle individual customer data such as credit card numbers, business files contain private employee information such as Social Security numbers, as well as corporate account information.

AIG has been offering this policy for about five years, says Callahan, and now covers about 10 million individuals. As an employee benefit, costs per person for the policy can range from $1 to $4.

While files may be handled with proper security, there's always a ripped-from-the-headlines incident in which a laptop goes missing or an employee steals confidential information for personal gain. As part of your service to your clients, you can help them be ready, so that if such a scenario befalls them, they can be proactive, instead of becoming just another headline.

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