I.D. theft: Digital defense is required in a disaster

Fires race through wealthy communities near Santa Barbara, Calif; hurricane Dolly hits the coast of Texas; floods swamp the Midwest. Property casualty insurers estimate more than $6 billion of property losses in the second quarter of 2008, resulting from 16 catastrophes in 27 states.

Also at risk in such events: personal data. Last week's news that 41 million credit-card numbers had been stolen by a Miami-based ring – the largest case of identity theft to date – again highlighted the threat from online data hackers.

But even the most organized households do not adequately safeguard their personal information after their home has been vacated or destroyed following a disaster. It's those moments when an identity thief can easily gain access.

American households are increasingly dependent on their computers to communicate with friends and family, pay their bills online, store important documents, and access news reports. With the home computer serving as the repository for valuable financial and personal data and with a plethora of financial documents containing birth dates, Social Security and tax ID numbers scattered throughout the home, it is easy to understand the growing exposure of Americans to identity theft.

Identity-theft victims spent an average of $1,865 to repair damage done to a credit account, according to a 2007 survey by the Identity Theft Resource Center, a nonprofit in San Diego.

The opportunities for identity thieves are magnified in a disaster situation, when highly sensitive personal documents, computers, cellphones and PDAs are left behind in a rush to vacate a home or office in the face of a disaster.

"People's lives revolve around digital data and most people don't have backups," explains John Rousseau, chief fraud officer of IdentityTheft 911, a Scottsdale, Ariz., company that helps protect households and businesses against identity theft.

Mr. Rousseau, who has worked with Katrina disaster victims in New Orleans, has witnessed the repercussions caused by a loss of digital data.

"You see the panic in their face during a disaster when they need that information and recognize they can't reclaim their identity which someone else may have stolen," he says.

Paul Stevens, director of policy and advocacy for the Privacy Rights Clearinghouse, a nonprofit consumer advocacy group, reinforces the importance of digital security.

"The digital world enhances the ability to protect key documents by giving individuals the opportunity to scan valuable personal documents into a thumb drive or memory stick, transferring critical data that must be absolutely encrypted to a safe location," he says. "Creating digital files of family photographs, identity and financial documents incorporates redundancies that can protect families who lose primary documents due to disaster."

Even in less threatening events, families who do not guard against digital failures are negatively affected. Ernie Bayard of Silver Spring, Md., experienced a data dump when a lightning strike last fall took out his home computer.

"It is wise to use an online backup system to capture all your data and to protect records," he says. "After our loss, we contracted with a company to automatically backup our hard drive, storing it off-site. It is relatively inexpensive, painless, and creates ease of mind."

To protect your identity in the event of a disaster, consider these steps:

•Make digital copies of favorite family photos, wills, deed to property, credit cards, car titles, health insurance, passports, pension and retirement documents, birth certificates, and wedding documents.

•Secure a safe deposit box at a bank for important documents, including a printout of key digital information (log-in information, passwords, frequently used e-mail addresses, credit-card numbers). In addition, place a copy of your computer hard drive in this box.

•Store tax documents, canceled checks, salary stubs, insurance and credit-card bills in a fire-proof box at home that can be quickly taken with you in case of a disaster.

•Back up and encrypt your PC. This is the most important step to protect against identity theft. Contract with an automatic download service to regularly back up your hard drive.

•After a disaster, remove sensitive information – Social Security numbers, tax data, birth dates, and credit-card numbers – from damaged materials prior to disposing. Preferably shred or burn any sensitive, damaged documents.

Dr. Kathleen Connell is a professor at Haas Graduate Business School, University of California, Berkeley.