Identity Theft Concerns Produce Promising Market for Information Protection Insurance

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A national survey conducted by graduate students at Boston University finds that identity theft is widely known and feared and that people are willing to pay to protect themselves from it.

Americans willing to pay for a personal information protection insurance plan expect to pay $88 annually, according to graduate student researchers at Boston University. The researchers link the public’s rising concerns over information security to increased media coverage of identity theft and recent security breaches at national data centers.

“Experts estimate that $53 billion is lost annually to identity theft,” says student researcher Joshua Storch. “Our goal was to see if consumers realize the risk this poses to them. From our survey, it’s clear they do.”

Through an online survey of 1,049 US adults, the students found that more than four in five of Americans agree that identity theft “is a major problem in the United States.” Nearly a third of us - 31% - are very concerned that identity theft could happen to us in the next five years. And when offered the option to pay for an insurance policy that would take care of their credit history, bank accounts and credit accounts in the event their identity was stolen, 72% indicated they were willing to pay at least something.

How much people are willing to pay varies dramatically. While the average among would-be payers was $88 a year, half the population was only interested in contributing $50 or less for their own protection. A scant few, or 22%, were willing to pay $100 or more a year. These most willing purchasers were young professionals with average incomes of $45,000 and above.

Willingness to pay comes as good news to companies developing exactly this kind of insurance plan, but the low dollar amount may not be sufficient to cover the cost of cleaning up after someone’s identity has been compromised. RelyData, LLC, a Chicago-based firm that offers identity restoration services, for example, works directly with employers to offer its resolution services as a corporate benefit - keeping the cost reasonable while providing effective coverage. Garnet Steen, President of RelyData, explained, “While credit reports and monitoring could be purchased for around $100 per year, these are merely notification services, and do nothing to help a victim of identity theft remove fraudulent entries in their records and restore their identities. Identity restoration may cost more than monitoring but provides far greater benefit.”

Mr. Steen went on to explain why offering RelyData’s 'Identity Shield' resolution services as an employee benefit makes sense, “Employers pay over $1,000 per incident in lost productivity when employees perform a do-it-yourself resolution. By providing identity theft resolution as an employment benefit, the cost is spread out across a large group. Each individual can receive this protection for as little as $10 per year, while employers reap the reward of a benefit that pays for itself many times over in saved employee time.”

It would seem, based on the students’ primary research, that RelyData and other firms like them are on the right track. Consumers area aware of the danger and willing to pay to protect themselves -- but as with anything else, they want to keep costs low.

About the Survey

The survey was conducted online during the third week of March, 2005. The sample of 1,049 participants (463 male, 586 female) was provided by online panel company Survey Sampling International, Inc. and the survey was conducted using Global Market Insite’s online survey tool, Net-MR. As an online survey, the opinions reflected here only represent the two-thirds of households with regular Internet access. For comparison, the margin of error for a randomly selected sample this size is +/- 3%.

About the College of Communication at Boston University

The College of Communication at Boston University is home to the Communication Research Center where professors train undergraduate and graduate students in the science of consumer research and analysis. This project was designed by students under the supervision of Professor James McQuivey.

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