Total reported dollar losses associated with identity theft are rising annually in Canada, with the Canadian Anti-Fraud Centre recording a rather alarming 68% increase from $6.47 million in 2007 to $10.88 million in 2009. And an Ipsos-Reid poll conducted in May 2010 found 97% of Canadians have heard of identity theft and 60% believe it will happen to them at some point in their lifetimes.

With this stack of statistics, is identity theft insurance something advisors should recommend as an additional way to ensure a client’s peace of mind? Maybe, but a thorough investigation of the offerings – and importantly, the deductible, if applicable – should be conducted first.

Though it may be offered as a standalone product, identity theft insurance in many cases is provided as an add-on to a homeowner’s insurance policy.

Your client should be aware, however, that the insurance won’t protect him or her from actually having his or her identity stolen, nor will it reimburse the client for any monetary losses resulting from the theft. Rather, coverage generally includes:

  • Any lost wages resulting from time off work to deal with the situation;
  • Some associated legal fees;
  • Registered mail and long-distance telephone costs;
  • Losses associated with credit cards and automated tellers; and
  • Notary costs for affidavits and other legal documents.

Some further offer a case manager’s assistance to restore the victim’s credit and reputation.

However, according to a 2006 report by the Public Interest Advocacy Centre (PIAC), Identity Theft Insurance – Miserly Upon Misery, “The companies that are defrauded by the use of personal information are generally the parties that must bear the loss if the thief is successful.” In these cases, a lawyer would likely not be needed.

Furthermore, according to the report, only some of the steps that need to be taken once a person finds out he or she is the victim of an identity theft can actually be performed by a third party; the “victim himself or herself must perform most of these steps.”

Regardless, it’s a good idea to suggest your client obtain a credit report at least annually to ensure there are no suspect transactions. Although provincial laws vary, consumers are able to access their credit reports for free through Equifax or TransUnion by submitting a request in writing.

These two credit bureaus also offer ongoing credit monitoring and other propositions to help protect your identity. The PIAC report, however, suggests “The prospect of credit bureaus selling credit monitoring services naturally brings up a conflict of interest with their duty to provide free credit reports upon request under provincial credit monitoring legislation.”

In addition, PIAC warns consumers “should be wary in applying for ID theft insurance and credit monitoring,” because most of these are online services and “require the consumer to enter sensitive personal information . . . the very information identity thieves are seeking.” The report further warns “credit bureaus such as Equifax have become a particular target of ID thieves. There is little reason to doubt that ID theft insurers and credit monitoring services likewise will become targets.”

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