A new report from AM Best highlights that even though ID theft coverage is offered as a standalone policy, but predominantly sold as part of a package, the market has seen a significant increase in standalone policies, to 2.3 million in 2021 from just over 300,000 in 2020.
Best notes that the increase is most likely due to the rising awareness and severity of ID theft.
The report states that the gradual increase up to 2020 may have been driven by those who were personally affected by ID theft fraud, were more susceptible to risk, or desired additional protection, especially as the risk has grown significantly over the past few years.
Despite a smaller policy count on the standalone side, these policies historically have covered a majority of ID theft claims.
Best notes that the number of claims from package policies skyrocketed in 2019-2020, reaching 64,375 in 2020 before plummeting to 3,000 in 2021. At the same time, standalone policy claims spiked in 2021, to 11,583 from approximately 3,000 in 2020.
Moreover, ID theft risk is specific to stolen personal information, whether in the form of medical insurance theft, driver’s license theft, social security theft or criminal ID theft. The coverage often is included as part of a homeowners insurance policy.
Best states that insurers should not only look to evolve their ID theft insurance policies offered, but they should also be paying attention to the services they offer their clients.
This is because ID theft fraud can be very difficult to track, especially for those that have no idea how the hacking took place. External carriers that specialize in cyber defense are able to provide clients with a wide range of supplemental services: assessment of devices, networks and online accounts; training services; online monitoring; and additional resources from experts.
Furthermore, ID theft coverage can be included in a policy in several different ways. The majority of insurers give customers the option to add ID theft coverage to either a homeowners, condo, or renters insurance product as a part of a package for an additional cost of anywhere from $25 to $60 per year, usually covering losses anywhere from $25,000 to $50,000.
“Due to the COVID-19 pandemic, most people increased their usage of digital technology and the internet during the COVID-19 pandemic. Consequently, cyber risk is starting to make more of a mark on the personal lines side,” said Helen Andersen, industry analyst, AM Best.
“Insurers that adapt to this environment and provide more-detailed coverage ultimately will remain relevant in the market, improve relations with customers and agents and likely grow premium.”