Survey Reveals Majority of Homeowners Fear Identity Theft and Think Government Should Do More to Protect Them

Business Wire, March 11, 2003

Business Editors/Real Estate Writers

SAN FRANCISCO--(BUSINESS WIRE)--March 11, 2003

National Survey Finds Many Homeowners Clueless About Adequately

Insuring for Fraud, Litigation and Home Improvement Expenses

Nine out of ten American homeowners have concerns about becoming victims of identity theft, the fastest growing category of fraud in the country, yet nearly two-thirds are unsure whether their insurance policy protects them financially if this crime were to happen to them. An overwhelming 83 percent think the government should take steps to help prevent identity theft.

These revelations are among the surprising findings released today from a national survey of 1,129 homeowners conducted by Harris Interactive(R) for Fireman's Fund Insurance Company, a leading provider of homeowners' insurance. The survey explored homeowners' understanding of the protection provided by their insurance policies for identity theft, litigation and full replacement costs for their home.

According to Federal Trade Commission statistics, identity theft jumped 72 percent between 2001 and 2002, from 220,000 incidents to 380,000. Although 97 percent of the homeowners surveyed had heard of identity theft, and nearly one in four knows someone who has been a victim, more than half (61 percent) are unsure whether their homeowner's insurance policy would compensate them for expenses entailed in recovering their credit following this type of fraud. Only 11 percent of the homeowners surveyed believe that their policy protects them.

"With the likelihood of identity theft increasing each year, these survey results suggest that more than 60 million homeowners could be at financial risk if they were to fall victim to this type of fraud," said Michelle Kenney, underwriting executive at Fireman's Fund, one of the few insurers that specializes in high-end policies. "Despite that increasing trend, only a small percentage of policies actually provide coverage for expenses incurred in recovering from identity theft."

Fear of Litigation

Homeowners also expressed concern about being personally sued. An overwhelming 94 percent feel there are more lawsuits today than 10 years ago, 86 percent think high-monetary judgments in personal lawsuits have been excessive, and 67 percent believe they personally might be sued sometime during their lives.

Despite these concerns, less than one in four have personal "umbrella" insurance to protect against a large dollar lawsuit. These supplemental policies raise the liability limits of the homeowners' and auto coverages to much higher levels that can protect against major personal lawsuits. For those who have umbrella coverage, the most common coverage limit (44 percent) is $1 million.

"We have seen a steady increase in requests for umbrella coverage, most likely driven by the fact that in 2002, there was a dramatic increase in jury awards," said Kenney.

According to a Tillinghast-Towers-Perrin report published this month, the total of the 100 largest jury awards was more than three times the 2001 total. In addition, the direct costs to society from the tort liability system jumped to $205 billion, the equivalent of a five percent tax on wages.

In the Dark About Home Replacement Costs

Most homeowners surveyed (80 percent) report that the market value of their home has increased in the last five years, but only 63 percent of those say they have increased their insurance coverage to account for that. Of the remaining participants, the main reasons cited for not increasing coverage include lack of time to look into coverage increase, not wanting premiums to go up, and simply not realizing they needed to change their policy.

"Most standard homeowners insurance policies do not automatically provide replacement cost coverage," said Kenney. "For most people, their home is the most valuable asset they have. To inadequately insure it, for any reason, is gambling with their financial security and their future."

One-third of the homeowners interviewed say they don't know what it would cost to replace their home, and just under one-third do not know if temporary living expenses are covered by their policies.

Fireman's Fund is one of a select few insurers who offer high-limit homeowners policies that protect against identity theft, personal liability claims and provide full home cost replacement coverage in most states. The company is also a major provider of full replacement cost coverage and umbrella policies in the $1 million to $50 million level.

A topline summary of the survey entitled, "Fireman's Fund Homeowners Insurance Awareness Survey," is available online at http://www.ffic.com/resources/HarrisTopline.pdf.> Methodology

This survey was conducted online within the U.S. between January 9 and 14, 2003, among 1,129 adults (ages 18 ) who said they own a home, have homeowners insurance and are at least somewhat involved in choosing the insurance. Figures for age, sex, race, education and number of adults in the household were weighted where necessary to bring them into line with their actual proportions in the population. "Propensity score" weighting was also used to adjust for respondents' propensity to be online. In theory, with a probability sample of this size, one can say with 95 percent certainty that the results have a statistical precision of /-3 percentage points of what they would be if the entire adult population had been polled with complete accuracy. This online survey is not a probability sample.(1)