Identity theft exposure and the business owner

A look at how to protect your company from the fastest-growing crime in America.

By John Roberts, CIC —Advisor, Commercial Insurance

Identity theft. We see and hear about it every day. As the fastest growing crime in America, identity theft should be a major and ongoing concern for all individuals. And, identity theft must be a major focus for every business with access to — and a database of — the personal information of its employees and/or customers.

As business owners or employees, you have access to a plenitude of personal information, including job applications, tax forms, credit card information and mailing lists. This database grows each day with each new application form and new customer credit card. While you may have this information in paper files, it’s likely stored and maintained on a company networked computer and/or your company’s computer server. This fact makes you a favorite target for hackers.

As a business owner, you are legally responsible for the safety of this information. That makes you liable should the information get stolen or misused.

This liability needs to be addressed by all businesses, no matter the size. As outlined by the Montana Legislature in Montana Code Annotated 2005 (30-14-1704), businesses have a responsibility for personal data and must follow certain timely steps and standards when it comes to handling the breach of personal information. This type of information includes names in use with social security numbers, driver’s license numbers and account numbers. (For complete information on Montana Code Annotated 2005, visit http://leg.mt.gov/css/LawsandConstitution/Current_Constitution.asp

In the insurance industry, once a liability is created, solutions are sought to insure against those liabilities and exposures. Because of the increasing threat of identity theft over the past several years, the insurance industry has responded with products designed to help protect businesses against identity theft.

Currently there are four major areas of protection regarding identity theft.

• Individual protection. Today many homeowner insurance policies now include individual protection for identity theft. This coverage generally is written as an endorsement to an existing homeowners policy and can provide funds to help policyholders re-establish their identity. Most insurers also have networks and resources to assist homeowners in this process.
• Employee protection. In addition to the numerous employee benefits offered by employers, identity theft coverage can be part of employee benefits packages. This type of coverage is an inexpensive way for businesses to add to their employee benefits packages.
• Customer protection. Montana Code Annotated 2005 clearly states the obligation of businesses to protect their customers’ personal information. Breach of this duty creates liability and expense for the business, including education, assistance and credit monitoring for each of the individuals affected by the loss of information, regardless of whether the personal information is used.
• Corporate protection. The largest expense a business will face relates to corporate protection. Various elements — including legal liability, administrative costs, civil suits, regulatory penalties and notification costs — can lead to significant immediate monetary exposures, in addition to time spent managing the crisis, damage to reputation and loss of customer confidence. Exposure here can cost in the millions, but corporate protection can offset many of these potential costs.

Identity theft will continue to be part of personal and business life in the modern world. To learn more about identity theft exposures and the types of available insurance policies, please call a local Payne Financial Group advisor.

John Roberts is an Advisor in Commercial Insurance for Payne Financial Group. You can him at jroberts@pfgworld.com.