Consumers without ID fraud insurance are in denial

Are consumers without insurance against identity fraud suffering from a severe case of "it'll never happen to me"?

This is the question that has been raised by the frightening statistic that identity fraud has increased by over sevenfold since 1999.

Figures released by Cifas, the UK's fraud prevention service, reports that whereas in 1999 there were just 9,000 recorded cases of identity fraud, in 2007 there were a whopping 77,500.

This type of crime cost the economy £1.5 billion in 2005, says the Cabinet Office, and to make matters worse until recently there had been little to put criminals off, with sentences for fraudsters being relatively light.

In light of these facts and figures, you'd think consumers would be beating down the doors of insurers, considering that the repercussions of being a victim of this type of crime can be pretty damning.

Their credit rating may take a battering, which in turn could affect their chances of securing a mortgage or, ironically, other types of insurance.

However, despite the logical argument for insuring oneself against such a tragic fate, consumer credit information firm Equifax is concerned that too many people are in denial about the reality of this crime.

Neil Munroe, external affairs director of Equifax, said: "The problem with ID theft and fraud is that most people don't think that it's going to happen to them.

"Therefore, they don't really think about insuring against it. It's probably the same sort of approach that we all adopt to insurance. We take it when we feel we need it."

In other words, just like those who buy burglar alarms after their homes have been robbed, people are more keen to insure themselves once they have already been a victim of the crime.

Mr Munroe added that there are now some insurance policies on the market offering protection against this sort of crime but he noted that they vary wildly in what they cover, from basic to "more involved" support.

Those in London may want to listen Mr Munroe's advice with particularly sharp ears, after research carried out by credit card protection firm CPP revealed that the capital is now the worst city in England for identity fraud.

CPP reports that in a survey it conducted, 20 per cent of Londoners admitted to having had their cards stolen and 28 per cent had been a victim of credit card fraud, highlighting the importance of insurance.

However, when seeking an insurance policy against identity fraud Equifax warns consumers to have a discerning eye and to scrutinise exactly what the deal will cover them for.

It urges consumers to look at how much they would be left to pay for and what the company is willing to shell out.

Equifax also stressed that under the Banking Code, credit card companies and banks are legally obliged to reimburse consumers with any money that may have been taken out of their accounts or debt that has been falsely accrued.

Mr Munroe concluded: "I would suggest that one thing any policy should have is the ability to offer you a copy of your credit file, because obviously, the key factor is that if you are going to have your ID stolen, the vast majority of the time it is going to result in somebody applying for credit in your name or try to take money out of your account.

"Your credit file is probably the best barometer of that sort of unwanted activity taking place."