Insurance is a hedge against the risk of loss, usually in monetary compensation.
We buy life insurance to capitalize a wage earner’s income stream. Long-term care insurance is used to pay potentially catastrophic costs for years of care through debilitating diseases, such as Alzheimer’s disease. There is no insurance for emotional losses or the loss of information. We know this because the grieving process is a result of emotional loss.
Unfortunately, the grieving process becomes more difficult with a lack of information. At no other time has this been more apparent than in the digital age. This is shocking because the digital age is supposed to provide us with access to information. However, it is exactly this access to information that creates the issues.
Digital assets are easy to create. They provide us with a wealth of opportunities but they also present a tremendous challenge when settling an estate.
What Are Digital Assets?
Digital assets are things we own or information that is stored digitally. For example, if an insurance agent sells a policy to a woman who doesn’t want paper statements, then her policy information becomes a digital asset.
In essence, the knowledge of the policy only exists digitally. The policy owner has a username and password where she logs in to check when the premiums are due. Maybe it’s a universal life policy and she checks the cash balance from time to time. However, she has no physical record of the policy – just a username and password.
Maybe she set the policy to have the premiums paid automatically through her bank’s online bill pay function.
Or maybe she has the policy prospectus but she chooses to store it in a virtual solution like Dropbox or Box. If she dies without ever telling someone about the policy, how will they find it? What if she never shared her usernames and passwords with anyone?
Digital assets are more than insurance policies. Our parents and grandparents used to store 5x7 pictures in labeled boxes around the house. We now store photos in Snapfish or Shutterfly. They’re not valuable assets that you can sell for millions of dollars, but they are valuable memories treasured by the family.
The same thing applies to letters. I remember seeing my grandfather’s old letters from World War II and my grandmother telling me how beautiful his handwriting was. My handwriting is a mess, but that doesn’t matter because all my “letters” are typed and in an email archive.
An asset may be defined as “a valuable person or thing.” That means an asset could be the knowledge of which bills I pay through my bank’s online bill pay. After all, in the days and weeks after I have died, it becomes valuable to my family to know how to keep the house running. They may not have value to the rest of the world, but my family photos are valuable to family and friends.
If we expand the definition of an asset, then we quickly start to see how our online accounts are digital assets. Facebook and Twitter accounts definitely have value. My email accounts are valuable as are my rewards programs through credit cards and airlines. In fact, most of my online accounts have some value to my family.
But unlike in the days of old, when my family could walk down the hall and open up the shoebox to find the pictures, today the laws governing access to online accounts stand in the way. Without knowledge of my username and password, my family can’t gain access to my digital assets. In effect, the value of these accounts is priceless.
Why Can’t Websites Simply Share Information With Beneficiaries or Executors?
This seems silly, right? Can’t an executor just call the bank and find out the username and password for the decedent? Or even better, can’t the bank just give the executor a list of companies that the deceased paid through online bill pay?
Current federal legislation makes it difficult for websites and the companies that operate them to share private information. Congress passed a bill in 1986, called the Stored Communications Act, that attempts to protect the privacy of Internet users.
The problem is that technology has advanced rapidly over the past 30 years and the law is extremely outdated. The law uses language associated with computers before the adoption of the Internet or mobile devices. The antiquated language in this bill along with the strict privacy protection outlined in the Computer Fraud and Abuse Act – also passed in 1986 – causes companies to be extremely protective of the privacy of their users, even after they have died.
To combat this, seven states have passed laws that provide executors with varying degrees of access to online accounts. These seven states are Connecticut, Rhode Island, Oklahoma, Nevada, Virginia, Indiana and Idaho. However, that leaves 43 states that have nothing helping families and executors to gain access to crucial information. Further complicating things is that each of the seven states that already passed the access legislation passed bills with different language.
Fortunately, the Uniform Law Commission – a group representing all 50 states to promote uniformity of state laws – has been tackling the problems with digital assets since 2012. Their goal is to propose legislation – currently called the Fiduciary Access to Digital Assets Act – to the states, providing fiduciary access to digital accounts. The model legislation would essentially give fiduciaries the authority to act as the deceased and gain access to digital accounts of the decedent.
This would be a big accomplishment because it would mean even if the family doesn’t know the username and password of an account, they will be able to gain access. In many instances now, not knowing the username or password all but ensures that the family is denied access.
Why Does It Matter to Me?
The digital age has impacted every profession. To some degree, it has commoditized many products. Insurance is no exception. Providing quality guidance to individuals and families on the issues that are important to them is a way many insurance professionals stand above the crowd.
Helping people understand and insure their risks is what you do. The unknown world of digital assets and estate administration is a large uninsurable risk. But this risk can be mitigated by increasing awareness of the problems digital assets create.
What Can We Do About It?
As professionals who work with clients regularly, there is much that can be done and it’s not difficult. It doesn’t take much to overcome some of these obstacles – it just takes a plan.
Advise your clients to follow these simple steps in order to document their digital assets:
List the websites where the individual has an account.
Provide information about where to find the username and password.
Indicate which email account it is tied to.
Provide the reasons why it is important.
These simple steps help families find important information.
I once had a colleague tell me that anywhere there was a risk, there was someone willing to insure that risk. While I agree with him on many counts, digital assets present a risk to our clients’ families and there isn’t a premium payment that can spread that risk. The only way for us to help our clients is to prepare them for the known issues that can occur due to the loss of information. Clients lean on their professional advisors to plan for tragic variables that cause pain in life and in death.