The Booming Biz of ID Protection

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In 2004, Experian added ID-theft insurance and other options to its Credit Manager Plan, which previously provided daily monitoring of Experian's reports for $9.95 a month.

UNCLEAR FEES

For all the would-be benefits, some cyberfraud experts and consumer advocates question the value of ID-theft protection products. According to Consumer Reports, part of the nonprofit testing and product-information group Consumers Union, ID-theft insurance generally costs $25 to $50 a year and carries a maximum benefit of $15,000 to $25,000, with deductibles of $100 to $250. Consumer Reports doesn't recommend buying ID-theft insurance but instead offers tips on preventing it.

In some cases, it's not always clear how much one is paying for ID-theft insurance, which often appears rolled into other items as part of a general package of insurance coverage, banking, or credit-monitoring services. Linda Foley, executive director of the nonprofit Identity Theft Resource Center, says you should buy the insurance only if you have extra money. And in that situation, she recommends a low-cost plan that's "somewhere around $25 a year."

Givens of the Privacy Rights Clearinghouse has a higher threshold: "ID-theft policies that cost upward of $120 a year, in my estimation, are not worth the money," she says.

The number of people victimized by ID theft amounts to about 4% of the 215 million adults who have active credit tracked by credit-scoring company Experian. Almost a third of the victims don't lose any money at all.

"BUYER-BEWARE SITUATION"

Foley says she hasn't encountered a single victim yet who has used ID-theft insurance to solve a case. After posting a survey on her Web site last year soliciting customer feedback on experiences claiming ID-theft insurance, she took down the survey after several months because she never received any responses. Normally, her surveys will draw a couple hundred participants from among the more than a million to visit the Identity Theft Resource Center in 2005.

"ID-theft insurance is a buyer-beware situation," Foley says. "Unfortunately, some companies really do try to use scare tactics to get you to buy the insurance."

John Spagnuolo, spokesman for the Insurance Information Institute, a trade association, says you can't put a price tag on the peace of mind that insurance provides. "Many people don't know where to start," he says. Coping with stolen identity "can be frustrating."

WEIGHING THE ODDS

Jerry Silva, a research director at research and advisory firm TowerGroup in Needham, Mass., says this is a frustration he's willing to risk. He received word that his credit-card company has lost data that includes his Social Security number and account number. He says the snafu by the company, which he declines to name, puts him at risk for ID theft.

Still, he's unwilling to shell out cash for extra safeguards. "If I'm going to get hit, I'll get hit," Silva says. If it happens, he plans to rely on his knowledge about ID theft to help him cope. He'd start by calling an organization like the Identity Theft Resource Center.

For the millions who are less self-reliant, there's always an insurance policy.

Ryst is a reporter for BusinessWeek.com in New York .