Identity theft, long the bane of IT departments, is also providing insurance companies with opportunities to offer a new kind of coverage and score some marketing points at the same time.Carriers are hiring third-party services to restore policyholders' stolen identities. In general, here's how it works: The victim calls the insurer to report the ID theft. After establishing the validity of the claim, the carrier transfers the caller to the vendor's call center. The third-party vendor swings into action, drawing upon relationships with credit rating agencies and other institutions to refurbish the victim's credit. Meanwhile, the insurer can track the case until closure.

The practice has become entrenched enough that the one vendor, Steve Christenson, president of Phoenix-based Identity Theft 911, can recite a customer list that includes Metropolitan Life Insurance Co., Liberty Mutual Insurance Co, the Chubb Group of Insurance Cos., Fireman's Fund Insurance Co., California Casualty Group, Amica Mutual Insurance Co., the Commerce Insurance Co., American National Property and Casualty Co., State Auto Insurance Co., Grange Mutual Insurance Co., Michigan Millers Mutual Insurance Co., Motorists Mutual Insurance Group and Country Insurance & Financial Services.

Yet, identity restoration remains new enough to provide a competitive advantage, says Matt Cullina, director of product management at New York-based MetLife. "From a marketing perspective we still have an edge," he says. Moreover, he adds, it's a "hot button" topic among consumers.

And little wonder. Some 28% of identity theft victims are unable to restore their identities on their own after a year of trying, according to a survey by Nationwide Mutual Insurance Co., Columbus, Ohio. Victims spend an average of 81 hours trying to resolve their cases and pay an average of $587 in expenses, including legal fees and lost wages, the poll indicates.

"One of our officers here at Nationwide was a victim of identity theft and realized the hours and hours that went into resolving and rebuilding his identity," notes Deidre Abbitt, the company's ID Theft product manager. Nationwide provides the service with help from a product called ID Theft Assist that's administered by Washington, D.C.-based Worldwide Assistance Services Inc.

Most victims aren't held responsible for fraudulent charges, but 16% of those surveyed by Nationwide report paying an average of $6,440 to cover some or all of the thief's purchases, the company says.

Perpetrators of fraud used victims' identities to spend an average of $3,968, and people don't realized they've become victims for an average of five-and-a-half months, the Nationwide survey shows.

Those are hardly isolated instances, says Kirk Voisin, Worldwide Assistance vice president of sales and marketing. More than 100 million Americans have felt the effects of identity theft, according to the San Diego-based Privacy Rights Clearinghouse.

Nobody's come up with a surefire way to stop such thefts, but restoration services address a key part of the fallout from the thievery: frustration.

MINIMIZING FRUSTRATION

Some 92% of victims say they were frustrated by the hassles of trying to rebuild their identities, Nationwide says. Sources of frustration, according to the survey, included uncooperative institutions, loss of money, damage to credit ratings, the emotional toll, feeling of disbelief, paperwork, phone calls, closing and opening of accounts, and the mystery of how thieves obtained the personal information.

When MetLife surveyed the victims their service had aided, the policyholders named "minimizing frustration" as the most important aspect of the assistance, says MetLife's Cullina. That took precedence over the other two oft-mentioned benefits-saving time and saving money. Victims who try to smooth over identity theft on their own often take the wrong steps, take the right steps incorrectly or take the same steps repeatedly, the MetLife survey indicates.

MetLife launched identity theft restoration services in March 2005, says Cullina. By then, most major carriers were offering policies that reimbursed victims for expenses incurred while restoring their own identities, but Cullina says his company was the first to offer third-party restoration services built into homeowners policies at no additional charge to consumers. Last year, MetLife was also the first company to bundle restoration services with auto policies for no extra charge, Cullina says.

Abbitt says Nationwide selected Worldwide as a vendor late n 2004 and launched the program in 2005. The carrier attaches the service to homeowners' policies and to auto insurance in some states. They also offer stand-alone coverage. As an endorsement to a homeowners or auto policy, the coverage costs $45 annually. As a stand-alone it costs $99. Policyholders can enroll for free weekly credit monitoring by San Francisco-based Transamerica Corp.

"We don't require underwriting for this product," says Abbitt.

Nationwide and MetLife both considered building an in-house approach to restoration but soon decided to hire experts, Abbitt and Cullina say.

THE VENDORS

MetLife chose 911 partly for its comprehensive approach, says Cullina. "Their folks who are working with our customers have been trained in bank fraud," says Cullina. "They are not call center people, by any means-they are expert at what they do."

He also cites what he calls "a sophisticated interviewing process," and adds that "they have experience dealing with all of the credit bureaus and many credit issuers. So, it allows for ease of doing business when those entities are contacted to help try to resolve the situation."

Identity Theft 911 staffers know how to handle the paperwork, such as affidavits, and are aware of the follow-up needed to make sure credit reports are cleaned, says Cullina. "We're very satisfied with working with them," he says.

Nationwide's Abbitt says Worldwide got its start decades ago in Europe by taking care of travelers stranded after losing cash, checks, passports, travel documents and identification.

"The thing that really cemented the relationship for us was the 40-year history they've had of providing services," says Abbitt. "We wanted people that had the experience to work with our customers."

Worldwide also attracted Nationwide because the vendor performs the restoration work, rather than simply advising the victim on restoration.

Worldwide contacts the institutions directly, says Abbitt. Some vendors write letters and then have the customers sign and mail them to the organizations they need to contact, she says.

"Because of the mass amount of personal time and time off work," she says, "we really felt it was important to have somebody who would be able to do that on behalf of the customer-and provide the emotional support to treat it like the emergency that it is."

Services from Worldwide can include counseling for victims who react emotionally to identity theft, Abbitt says. "They're used to dealing with people in highly emotional situations," because of their experience with distressed travelers, she says.

Besides talking up the vendors, Cullina also calls attention to the breadth of MetLife's coverage.

THE COVERAGE

MetLife covers victims of "full-blown ID theft," where thieves pilfer personal identifying information to create new accounts, often keeping victims unaware because the bills are sent to other addresses.

In addition, the company covers account takeovers, where criminals take over a single account and start using it.

"We also cover preventative, proactive measures," says Cullina. "So, if you just have a suspicion something has gone wrong-say your wallet is missing and you're not sure if lost or stolen-you can call in to the service and they'll give you general advice on the pros and cons of putting a credit alert on your credit report."

Whether including this type of coverage has resulted in increased sales had not been determined at press time by MetLife or Nationwide, Cullina and Abbitt say.

"We do think it is a great product that might bring people to Nationwide," says Abbitt. "We are looking at whether it has been beneficial in cross-selling but those marketing numbers just aren't in yet."

Nationwide also could not say how much faster consumers were discovering identity theft because of the credit monitoring because of the feature's newness, Abbitt says.

MetLife measures retention rates and surveys producers but considers the findings proprietary, Cullina says.

He does note that agents like the offering. "It's just that little extra edge that can be used as a sales tool," he says.

"For folks who have been processed in this service, we're seeing quite a lift," he says of retention rates. "Folks are very satisfied with this service and, therefore, happy to be customers of MetLife. It definitely increases that appreciation for us."

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