Tag Archives: social security number

trends

13 Emerging Trends for Insurance in 2016

Where does the time go?  It seems as if we were just ringing in 2015, and now we’re well into 2016. As time goes by, life changes, and the insurance industry—sometimes at a glacial pace—does, indeed, change, as well. Here’s my outlook for 2016 on various insurance topics:

  1. Increased insurance literacy: Through initiatives like The Insurance Consumer Bill of Rights and increased resources, consumers and agents are both able to know their rights when it comes to insurance and can better manage their insurance portfolios.
  2. Interest rates: The federal funds target rate increase that was announced recently will have a yet-to-be determined impact on long-term interest rates. According to Fitch Ratings, further rate increases’ impact on credit fundamentals and the longer end of the yield curve has yet to be determined. Insurance companies are hoping for higher long-term rates as investment strategies are liability-driven. (Read more on the FitchRatings website here). Here is what this means: There will not necessarily be a positive impact for insurance policy-holders (at least in the near future). Insurance companies have, for a long period, been subsidizing guarantees on certain products or trying to minimize the impact of low interest rates on policy performance. In the interim, many insurance companies have changed their asset allocation strategies by mostly diversifying their portfolios beyond their traditional holdings—cash and investment-grade corporate bonds—by investing in illiquid assets to increase returns. The long-term impact on product pricing and features is unknown, and will depend on further increases in both short- and long-term interest rates and whether they continue to rise in predictable fashion or take an unexpected turn for which insurers are ill-prepared.
  3. Increased cost of insurance (COI) on universal life insurance policies: Several companies—including Voya Financial (formerly ING), AXA and Transamerica—are raising mortality costs on in-force universal life insurance policies. Some of the increases are substantial, but, so far, there has been an impact on a relatively small number of policyholders. That may change if we stay in a relatively low-interest-rate environment and more life insurance companies follow suit. Here is what this means: As companies have been subsidizing guaranteed interest rates (and dividend scales) that are higher than what the companies are currently (and have been) earning over the last few years, it is likely that this trend will continue.
  4. Increasing number of unexpected life insurance policy lapses and premium increases: For the most part, life insurance companies do not readily provide the impact of the two prior factors I listed when it regards cash value life insurance policies (whole life, universal life, indexed life, variable life, etc). In fact, this information is often hidden. And this information will soon be harder to get; Transamerica is moving to only provide in-force illustrations based on guarantees, rather than current projections. Here is what this means: It will become more challenging to see how a policy is performing in a current or projected environment. At some point, regulators or legislators will need to step in, but it may be too late. Monitor your policy, and download a free life insurance annual review guide from the Insurance Literacy Institute (here).
  5. Increased complexity: Insurance policies will continue to become more complex and will continue their movement away from being risk protection/leverage products to being complex financial products with a multitude of variables. This complexity is arising with products that combine long-term care insurance and life insurance (or annuities), with multiple riders on all lines of insurance coverage and with harder-to-define risks — even adding an indexed rider to a whole life policy (Guardian Life). Here is what this means: The more variables that are added to the mix, the greater the chance that there will be unexpected results and that these policies will be even more challenging to analyze.
  6. Pricing incentives: Life insurance and health insurance companies are offering discounts for employees who participate in wellness programs and for individuals who commit to tracking their activity through technology such as Fitbit. In auto insurance, there can be an increase in discounts for safe driving, low mileage, etc. Here is what this means: Insurance companies will continue to implement different technologies to provide more flexible pricing; the challenge will be in comparing policies. The best thing an insurance consumer can do is to increase her insurance literacy. Visit the resources section on our site to learn more.
  7. Health insurance and PPACA/Obamacare: The enrollment of individuals who were uninsured before the passage of Obamacare has been substantial and has resulted in significant changes, especially because everyone has the opportunity to get insurance—whether or not they have current health issues. And who, at some point, has not experienced a health issue? Here is what this means: Overall, PPACA is working, though it is clearly experiencing implementation issues, including the well-publicized technology snafus with enrollment through the federal exchange and the striking number of state insurance exchanges. And there will be continued challenges or efforts to overturn it in the House and the Senate. (The 62nd attempt to overturn PPACA was just rejected by President Obama.) The next election cycle may very well determine the permanency of PPACA. The efforts to overturn it are shameful and are a waste of time and money.
  8. Long-term care insurance: Rates for in-force policies have increased and will almost certainly face future increases—older policies are still priced lower than what a current policy would cost. This is because of many factors, including the prolonged low-interest-rate environment, lower-than-expected lapse ratios, higher-than-expected claims ratios and incredibly poor initial product designs (such as unlimited benefits on a product where there was minimal if any claims history). These are the “visible” rate increases. If you have a long-term care insurance policy with a mutual insurance company where the premium is subsidized by dividends, you may not have noticed or been informed of reduced dividends (a hidden rate increase). Here is what this means: Insurance companies, like any other business, need to be profitable to stay in business and to pay claims. In most states, increases in long-term care insurance premiums have to be approved by that state’s insurance commissioner. When faced with a rate increase, policyholders will need to consider if their benefit mix makes sense and fits within their budget. And, when faced with such a rate increase, there is the option to reduce the benefit period, reduce the benefit and oftentimes change the inflation rider or increase the waiting period. More companies are offering hybrid insurance policies, which I strongly recommend staying away from. If carriers cannot price the stand-alone product correctly, what leads us to believe they can price a combined product better?
  9. Sharing economy and services: These two are going to continue to pose challenges in the homeowners insurance and auto insurance marketplaces for the insurance companies and for policy owners. There is a question of when is there actually coverage in place and which policy it is under. There are some model regulations coming out from a few state insurance companies, however, they’re just getting started. Here is what this means: If you are using Uber, Lyft, Airbnb or a similar service on either side of the transaction, be sure to check your insurance policy to see when you are covered and what you are covered for. There are significant gaps in most current policies. Insurance companies have not caught up to the sharing economy, and it will take them some time to do so.
  10. Loyalty tax: Regulators are looking at banning auto and homeowners insurance companies from raising premiums for clients who maintain coverage with them for long periods. Here is what this means: Depending on your current auto and homeowners policies, you may see a reduction in premiums. It is recommended that, in any circumstance, you should review your coverage to ensure that it is competitive and meets your needs.
  11. Insurance fraud: This will continue, which increases premiums for the rest of us. The Coalition Against Insurance Fraud released its 2015 Hall of Shame (here). Insurance departments, multiple agencies and non-profits are investigating and taking action against those who commit elder financial abuse. Here is what this means: The more knowledgeable that consumers, professional agents and advisers become, the more we can protect our families and ourselves.
  12. Uncertain economic and regulatory conditions: Insurance companies are operating in an environment fraught with potential changes, such as in interest rates (discussed above); proposed tax code revisions; international regulators who are moving ahead with further development of Solvency II; and IFRS, NAIC and state insurance departments that are adjusting risk-based capital charges and will react to the first year of ORSA implementation. And then there is the Department of Labor’s evaluation of fiduciary responsibility rules that are expected to take effect this year. Here is what this means: There will be a myriad of potential outcomes, so be sure to continue to monitor your insurance policy portfolio and stay in touch with the Insurance Literacy Institute. Part of the DOL ruling would result in changes to the definition of “conflict of interest” and possibly compensation disclosure.
  13. Death master settlements: Multiple life insurance companies have reached settlements on this issue. Created by the Social Security Administration, the Death Master File database provides insurers with the names of deceased people with Social Security numbers. It is a useful tool for insurers to identify policyholders whose beneficiaries have not filed claims—most frequently because they were unaware the deceased had a policy naming them as a beneficiary. Until recently, most insurers only used the database to identify deceased annuity holders so they could stop making annuity payments, not to identify deceased policyholders so they can pay life insurance benefits. Life insurers that represent more than 73% of the market have agreed to reform their practices and search for deceased policyholders so they can pay benefits to their beneficiaries. A national investigation by state insurance commissioners led to life insurers returning more than $1 billion to beneficiaries nationwide. The National Association of Insurance Commissioners is currently drafting a model law  that would require all life insurers to use the Death Master File database to facilitate payment of benefits to their beneficiaries. To learn more, visit our resources section here. Here is what this means: Insurance companies will not be able to have their cake and eat it too.

What Can You Do?

The Insurance Consumer Bill of Rights directly addresses the issues discussed in this article.

Increase your insurance literacy by supporting the Insurance Literacy Institute and signing the Insurance Consumer Bill of Rights Petition. An updated and expanded version will be released shortly  that is designed to assist insurance policyholders, agents and third party advisers.

Sign the Insurance Consumer Bill of Rights Petition 

What’s on your mind for 2016? Let me know. And, if you have a tip to add to the coming Top 100 Insurance Tips, please share it with me.

ID Theft: A Danger Even After Death

Take your driver’s license out of your wallet. Flip it over. Now look carefully at the back of it. There’s no box to check for “identity donor.” Yet when it comes to identity-related crimes, one of the greatest times of vulnerability is immediately after you die.

You can do everything right. You can use long and strong passwords and account-unique user names. You can check your financial accounts and monitor your credit on a regular basis, you can set up transaction alerts on your credit cards – even order a credit freeze – and then you die. Well, not entirely…

Include Identity in Your Estate Planning

A good identity thief can undo all your fraud precautions with a few phone calls. Most people don’t think about this, because it’s a wee bit late to refinance the family homestead – much less worry about interest rates – when you’re dead. Regardless, the recently deceased continue to exist on paper, and this may be the case for some time. Meanwhile, many bankable facts – key among them your Social Security number and personally identifiable information – are just sort of there in the form of “zombie” purchasing power. An identity thief can use that purchasing power to drain your bank accounts, open new credit in your name and perpetrate all sorts of fraud that can harm your family and heirs.

Think of your post-mortem identity as a would-be extra on “The Shopping Dead.” Now that you have that image in your head, take the time to arrange for the deactivation of your identity by making it part of your estate planning. This will mostly take the form of a to-do list for whomever will be handling your affairs, because nothing can be done till…well, you know, after the fact. There are many good resources, including this list from IDT911.

There are many different scams out there, ranging from the misappropriation of Social Security payments to the more old-fashioned practice of ghosting, whereby a person of approximately the same age assumes the identity of the deceased. In keeping with the proliferation of possible crimes, there are plenty of criminals out there who make a living in this post-mortem niche. They scan death notices in the local paper, read obituaries, even attend funerals and, make no mistake about it, can get a lot of shopping done with your available credit before the three credit reporting agencies and your current and future potential creditors are notified of your demise. Those same bad guys may also use your Social Security number to grab a big fat tax refund (if you’re lucky enough to pass away during tax filing season).

How will they get the information needed to commit fraud? Sometimes the perpetrator is a family member, so he already has access. But more often, family members are distracted and distraught. There are visitors who come and go, unchecked, and of course the numerous demands of making final arrangements and dealing with matters of the estate. If there was a long illness, unsupervised healthcare workers may have had the run of the deceased’s domicile – including the owner’s most sensitive information. Maybe the wake was at the deceased’s home, or people sat shiva there. The opportunities for fraud abound. Funerals, of course, provide a thief with a precise time to get what he or she wants. But instead of grabbing the television or the silver (too easy to miss), an envelope containing a financial statement or a copy of last year’s tax return might go walkabout. From there, it’s a race to apply for as much credit and buy as many pricy things for resale as possible before the money spigot coughs credit dust.

The Bigger Picture

Government agencies are famously slow to get the news of a person’s undoing.

An audit of the Social Security Administration conducted by the Office of the Inspector General found approximately 6.5 million Social Security numbers belonging to people aged 112 or older whose death information wasn’t in the system. Of those numberholders, only 13 people were still receiving payments; the rest consisted of “numberholders who exceeded maximum reasonable life expectancies and were likely deceased.” The fact that their deaths were not recorded in Numident (the SSA’s numerical identification system), and thus are also missing on the Master Death List, leaves plenty of runway for misconduct. According to the audit report, the “SSA received 4,024 E-Verify inquiries using the SSNs of 3,873 numberholders born before June 16, 1901.”

On the off chance you missed the memo while diving for sunken treasure at the bottom of Loon Lake: Identity theft is now the third certainty in life, right behind death and taxes. When a loved one passes, there is a trifecta, which is why it’s trebly important to protect against the threat of a different kind of life everlasting.

The State of Cyber Insurance

Cyber attacks are escalating in their frequency and intensity and pose a growing threat to the business community as well as the national security of countries. High-profile cyber incidents in 2014 reflected the expanding spectrum of cyber threats, from point-of-sale (POS) breaches against customer accounts to targeted denial-of-service (DoS) attacks meant to disable a company’s network. Businesses in ever-greater numbers sought financial protection through insurance, buying coverage for losses from data breaches and business outages.

Boost in Cyber Insurance Demand Drives Insurers’ Response

Healthcare facilities, universities and schools continue to be on cybercriminals’ radar, but attacks in the hospitality and gaming, power and utilities and other sectors reveal that no organization is immune to a cyber attack or failure of technology.

Healthcare and education clients had the highest cyber insurance take-up rates in 2014, followed by hospitality and gaming and services. Universities and schools present attractive targets because they house a vast array of personal information of students, parents, employees, alumni and others: Social Security numbers, healthcare information, financial data and research papers can all be compromised.

The broader scope of hacktivists contributed to the increase in cyber insurance purchases in 2014. Sectors that again showed notable year-over-year increases in the number of clients purchasing cyber coverage included hospitality and gaming and education. Other areas that stood out in 2014 included the power and utilities sector, with more clients buying standalone cyber coverage. Power and utilities companies frequently cite the risks and vulnerabilities associated with the use of supervisory control and data acquisition networks — which control remote equipment — and the cost of regulatory investigations as driving factors behind their cyber coverage purchases.

The reasons for purchasing cyber coverage vary from board mandates seeking to protect corporate reputations to companies looking to mitigate potential revenue loss from cyber-induced interruptions of operations. Insurers responded to this demand by offering broader cyber insurance coverage in 2014, including coverage for contingent business interruption and cyber-induced bodily injury and property damages. They also expanded availability of loss-control services, including risk-assessment tools, breach counseling and event response assistance.

Cyber Limits Rise

Companies with revenues of more than $1 billion have increased their cyber insurance limits worldwide by 42% on average since 2012, according to Marsh Global Analytics estimates. Over the same time period, healthcare companies have bought 178% more cyber insurance, and power and utilities firms have expanded their coverage by 98%.

Rising spending on cyber insurance

Source: Marsh Global Analytics. Percentage increase in spending by companies with more than $1 billion in revenues on cyber-risk insurance from 2012 through 2014.

Cyber Rates and Coverage

Increases in the frequency and severity of losses and near-constant headlines about attacks and outages kept cyber insurance premiums generally volatile in 2014. Average rate increases at renewal for both primary layers and total programs were lower in the fourth quarter than in the first. The increased loss activity prompted pricing challenges for some insureds, particularly retailers, where renewal rates rose 5% on average and as much as 10% for some clients.

Market capacity also varied according to industry. Most industries were able to secure cyber coverage with aggregate limits in excess of $200 million, while the most targeted industries, like retailers and financial institutions, faced a challenging market.

Insureds also face heightened due diligence from underwriters seeking to drill down beyond simple reviews of the company’s general information security policies. For example, insureds in the retail sector are being asked about their deployment of encryption and EMV (credit card) technology. And all insureds are now routinely asked whether they have formal incident response plans in place that outline procedures for protecting data and vendor networks and, more importantly, if such plans have been tested.

A Growing Concern

In 2015, managing cyber risk is clearly a top priority for organizations. For example, business interruption (BI) drew a lot of attention in 2014, a trend likely to continue throughout 2015. While BI has historically been thought of as the effect of a critical system going down for an extended period, technology failures and cyber attacks can create far-reaching outages affecting secondary systems, clients and even vendors. Such events can also lead to higher recovery costs, which are becoming a concern for boards of directors and senior management.

There is also concern stemming from the expansion of regulation and litigation. Regulators were active in policing cyber risks in 2014, and oversight is likely to expand significantly in coming years. With cyber risk seen as a critical issue on both sides of the aisle in Washington, D.C., companies will face regulatory challenges in 2015 and beyond.

Sectors that have already seen significant regulatory activity — for example, healthcare, financial services and education — will likely face more stringent regulations and larger fines. All industries should pay attention to existing and impending regulations, tighten controls and prepare to present and defend their compliance regime. Civil litigation in the wake of a breach or disclosure of a cyber event also escalated in 2014, with class actions at times following the disclosure of a breach by mere hours.

As demand for cyber insurance grows, remember that risk transfer is only part of the solution. Enhanced information sharing between industry and government is another step toward having a comprehensive risk-mitigation strategy. Insurers and brokers are expanding the availability of loss-prevention and risk-mitigation services such as risk-assessment tools, breach preparation counseling and breach response assistance. The expanded roster of services and enhanced coverage can provide additional value from policies, usually without a specific added premium.

New Worry on ID Theft: Tax Fraud

Statistics on identity theft show that tax-related fraud causes billions of dollars of financial harm, but tax fraud assistance may or may not be included in identity theft protection products. For comprehensive coverage, an identity theft protection service must include tax fraud assistance.

What is tax fraud?

Instances of tax fraud could involve…

  • Phone scams where thieves pretend to be the IRS calling for money or information
  • Phishing scams where fraudsters send fake IRS emails or set up unsolicited websites to get money or information
  • Criminals using false information or a taxpayer’s stolen information to file fraudulent tax returns, thereby getting the victim’s refund
  • Dishonest tax preparers who defraud their clients with false deductions, inflated expenses or the like

How common is tax fraud?

Every tax season – and all the months in between – the U.S. Treasury Inspector General for Tax Administration (TIGTA) deals with dishonest tax-related schemes. The TIGTA has received well over 90,000 complaints about IRS phone scams and found that victims have lost approximately $5 million.

In 2013, the Federal Trade Commission (FTC) received 1,455,146 identity theft complaints – a third of which stemmed from tax-related fraud. In 2014, the FTC’s 1.5 million fraud-related complaints revealed that consumers have paid a total of $1.7 billion because of fraud, and a third of those complaints were also tax-related.

Fake tax returns cause problems, as well: $4 billion of tax refunds went to fraudsters after they sent in fake tax returns to the IRS.

How do identity theft protection plans address tax fraud?

Unfortunately, not many products provide services specifically geared toward preventing tax fraud. Common features, like credit monitoring, are less likely to catch these kinds of crimes because tax information is not connected to the main credit activity being monitored.

Another reason for lack of tax fraud assistance could be strict limitations on a third party’s ability to communicate with the IRS. The IRS requires that anyone communicating with it on a victim’s behalf must have IRS-approved credentials (e.g. enrolled agent, certified tax preparer or certified public accountant).

The upkeep of a tax fraud assistance division can get expensive, as well. A significant amount of time and money are needed for finding approved specialists, giving them the time to work through each case and maintaining the correct credentials. Some certifications involve continuing education, periodic renewal fees that can really add up and purchasing and maintaining a tax preparer bond in the thousands of dollars.

Despite limited capabilities to detect that a member is a victim of tax fraud or act on a victim’s behalf with the IRS, a specialist could still assist victims by guiding them on what to do next and giving them the necessary resources to carry out the steps themselves.

How can you avoid tax fraud?

First, whether it’s on your own or through an identity theft protection plan, tap into resources about how to avoid victimization. For example, learn how to pick a reliable tax preparer and how to handle tax documents with confidential information.

Second, make sure your protection plan includes Social Security number (SSN) monitoring because your SSN is a key piece of information that the IRS uses to confirm your tax return actually came from you. In some instances, if a taxpayer’s SSN is at risk, the IRS will issue a special PIN number that differentiates the taxpayer’s real tax return from the thief’s fake ones.

Third is tax fraud assistance, which provides access to professionals who will help victims report the crime and address the resulting issues. Victims of tax scams deal with the same burden of significant financial losses and rebuilding reputations that accompany any other kind of fraud. Support from people who are familiar with both the tax system and identity theft recovery will give victims direction and help them take action.

Taxes are already frustrating for many, so adding the problem of identity theft only aggravates the situation. The statistics prove that tax fraud is relevant and must be taken into account when building security against identity theft and fraudulent activity.

Why Credit Monitoring Isn’t Enough

Having credit monitoring instead of identity monitoring is like putting a security system in the elevator but not in the whole office building. The scope of security is limited and leaves the workforce vulnerable. Thus, understanding how monitoring programs differ, how they work and why it matters is critical for safeguarding your identity.

Why should you care?

Victims of identity theft deal with increased stress, hours of work rebuilding their reputation and recovering from major financial losses; all of which have major consequences in other areas of life – like decreased productivity and performance on the job.

Given the statistics, if you haven’t dealt with the crime in some capacity, it’s only a matter of time.

The good news is that arming yourself with credit monitoring and identity monitoring gives you a better chance of stopping identity theft before it gets out of hand, thereby diminishing the negative effects that follow.

What is credit monitoring? How does it work?

There’s a broad range of credit monitoring services available in today’s market, and each program varies. Credit monitoring is a reactive approach to identity theft that involves checking credit reports for fraudulent activity. Because a credit report shows past activity, it will only reveal fraud or theft that has already affected the victim. That’s why it’s like only having security in the elevator: Once you realize the culprit is there, he has already infiltrated the building.

Credit monitoring programs will pull a member’s report, often quarterly or annually, from any number of the three major credit bureaus and make it visible to the member. On top of that, programs watch credit reports, transactions and activity for changes that could be criminal.

Another aspect of credit monitoring is resolution and recovery assistance, but, again, the levels of assistance vary from product to product. For instance, credit monitoring services will alert a member if they find fraudulent activity on the credit report(s), but some services don’t inform the credit bureaus on behalf of the member.

What is identity monitoring? How does it work?

Identity monitoring takes a more active approach. It not only focuses on credit reports but broadens the security sweep to account for name, birth date, address, email, driver’s license, Social Security number and more. Think of it as a security system for the whole office building, with security officers at every door and window.

Top-notch identity monitoring programs will check national databases for suspicious activity, watch out for questionable transactions and ultimately try to keep the member informed with real-time alerts about a data breach or fraudulent act. Touch points could even include scanning criminal record databases, sex offender registries and public records.

Identity monitoring can also give people peace of mind about their biggest worries: More than 70% of consumers are concerned about their Social Security number, credit card, insurance and driver’s license number, while less than 60% are concerned about their credit score and transaction history. People want more protection than what’s offered by credit monitoring alone, and identity monitoring is the answer.

What is the difference?

One major difference between identity monitoring and credit monitoring is accuracy. The all-inclusive nature of identity monitoring allows for a more accurate assessment of susceptibility to identity theft. For example, credit monitoring may not detect problems like tax fraud or medical identity theft because credit reports don’t necessarily show those types of information. Because identity monitoring is more robust, it can discover anomalies and provide protection for more than the financial aspects covered by credit monitoring.

Simply put, identity monitoring provides more coverage than credit monitoring.

For more information, visit clcidprotect.com.