Security dealers take on identity theft

While most people think about security in the traditional sense of protecting physical assets, there is an ever-growing and potentially more damaging threat to consumers these days in the form of identity theft. According to an identity theft survey conducted by the Federal Trade Commission, approximately 8.3 million Americans in 2005 said they discovered that that were victims of identity theft in one form or another.

Since that time, cases of identity theft have only continued to grow. According to a report issued earlier this year by financial consulting firm Javelin Research and Strategy, more than 11 million Americans in 2009 were victims of identity theft. The 2010 Identity Fraud Survey further noted that the average identity theft victim spent 21 hours and $373 of their own money fixing the damage.

The problem has become so pervasive that many in the security dealer community have begun offering identity theft prevention and recovery solutions as a part of their monitoring package. With dealers always exploring new ways to create recurring monthly revenue, some see the move to providing identity theft solutions as a natural evolution of the market.

Available Solutions

One company that is offering a suite of identity and computer security solutions through the dealer channel is Ocenture. Ocenture not only offers identity theft protection and recovery services, but also a host of other products including Internet security software, crime and sexual predator monitoring, family protection software, online data backup, password management, computer theft protection, and remote technical services.

Ocenture CEO Adrian Sedlin said that the company identified the residential security market in 2006 as being an emerging vertical for identity theft solutions. He added that they have been developing products for the market over the past two and a half years. The company officially announced at ESX last month that it has partnered with Pennsylvania-based Guardian Protection Services.

Sedlin said that he thinks it makes sense for dealers to offer Ocenture's solution as a complimentary service as either part of bundle or as up-sell or cross-sell.

"We had a couple of fundamental observations about the industry. The industry has historically been about access control, perimeter security and doors and windows," he said. "If you go to the ISC show, you see 999 booths dedicated to hardware. What we find interesting is that people in the industry ask the question of how can we use technology to better secure doors and windows? The question we feel the industry has not identified is how has technology changed the things that we need to secure?"

Sedlin said that dealers also have a built-in advantage when it comes to selling identity theft solutions because they already have established a relationship with their customers to protect their physical assets. Historically, Sedlin explained that security dealers have thought of themselves as a home security company rather than a consumer security company, which could change moving forward.

"We really feel there was a migration opportunity for the industry at least when it comes to the residential market, to give a broader definition and say, 'no, we are in the consumer security business,'" he said. "Companies that think in those terms will be doing far better in the future than those that say 'we just do residential.'"

Another company offering an identity theft solution, albeit with a different approach, is ID Medics by Crest Electronics.

Rather than focus on prevention, Crest Electronics President David Castelli said ID Medics provides customers with a fully-managed identity theft recovery solution.

"(The ID Medics) program is set on the basic level that ID thefts will and can occur no matter what level of security a consumer puts up," he said. "It is inevitable, it will happen, there is not enough security to have 100 percent protection."

What separates ID Medics from other recovery products is that it is fully managed, Castelli said. All the customer has to do is make a phone call to the company and a "recovery advocate" will handle the issue in question. Castelli said often times, companies will offer assisted recovery to customers, meaning that they will send them forms to fill out and walk them though the process, rather than having someone take care of the entire process for them.

"We saw (identity theft solutions) as a situation where people have trusted us to protect their property, their facilities for all these years with video security and other protective products... and we saw our (dealers') clients were not being offered anything from a security professional," he said. "Instead, they are having to trust some guy on a commercial or some other person selling the product that they have never done business with."

Neither the Ocenture nor ID Medics solution requires any additional infrastructure investment from the dealer since any issues pertaining to an actual theft of a customer's identity will be handled directly by the respective company and not the dealer.

Businesses may also look to security dealers for identity theft products as the enforcement of the FTC's Red Flags Rule goes into effect in January. The Red Flags Rule essentially holds some businesses and organizations responsible for the protection of their customers' sensitive data. According to the FTC's website, the Red Flags Rule requires that organizations "implement a written identity theft prevention program designed to detect the warning signs - or 'red flags' - of identity theft in their day-to-day operations."

The Dealer Perspective

Tim Daugherty, owner of Union Town, Ohio-based Total Control, which has partnered with Crest to offer ID Medics, said that identity theft solutions present an appealing RMR opportunity that many dealers would be hard pressed not to explore.

"As far as bundling (the ID Medics product) with what we offer, at the price point they have, there really is no hesitation," he said. "There's not even a financial impact compared with what (the customer) is going to spend on monthly monitoring anyway."

Though he says he envisions bundling ID Medics with monitoring contracts, Daugherty indicated that he's received a lot interest in it as a standalone product.

"The way that (the solution) is kind of evolving for us is as a standalone product. We formally rolled out a partnership with an IT company, who was using it as a part of their vault of products that they offer to customers for security of data and security of their businesses," he said. "The way we intend to market it by itself, however, is as part of the ongoing monthly monitoring of surveillance systems."

Not only do identity theft solutions help dealers generate new RMR streams, they also offer additional value to customers, according to Bill Graham, senior vice president of sales and marketing for Guardian.

"One of the things that we've been trying to do is look at how we can bring more value to what we offer to our customers," Graham said. "I addition to that, I think there is a natural tie-in. We like to think of ourselves as more than just physical security, providing (customers) with other types of security."

According to Graham, customers who sign up to receive monitoring services from Guardian and choose to have their monthly payment automatically deducted from their checking accounts will receive the base-level Ocenture identity theft solution for free. Customers will also be given the option to upgrade to a premium service that includes such features as password security and anti-virus protection for an additional charge.

Though they have to create some "back-end" support for the solution, such as creating efficient ways to transmit customer data and billing information, Graham said that most issues pertaining to the Ocenture product will be handled by the company itself and not by Guardian with the exception of providing some basic information.

Graham added that while some may see offering these identity theft solutions as just another way to create RMR, Guardian has a different perspective.

"Our thought process is we want to add value to the product that we offer, thereby enhancing the lifecycle of the customer. Our customers will maybe think twice before they decide to leave our service if we are providing more than just security monitoring."