Security in an error-prone world

Except this isn't happening really. Firstly, the losses due to transaction fraud just aren't that big. The banks insure themselves and take the costs out of the fees they charge. The 1.5% they charge on credit cards probably more than makes up any costs they might make due to fraud. And since the losses are going down rather than up, there's no reason for this policy to change.

AFAIK there is no insurance policy for lost/stolen identities. Primarily I think because costs are highly variable and hard to quantify and it just doesn't happen very often. And an insurance policy would pay money, whereas what you really need is to get records cleaned up and removed. I'm not sure if any insurance company is interested in doing that kind of work.