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Introduction
 
With increasing media attention being devoted to the issue of identity theft and the advent of chip and pin, which is expected to increase the prevalence of this crime, it seems logical that the insurance industry has developed a policy that offers protection against this risk. But what is the potential for growth in this market?
 

 
Scope
 
Provides government statistics on the prevalence of identity fraud in the UK
 
Examines the insurance product and its different guises
 
Draws on US statistics to highlight the costs victims have to bear in terms of money and time
 
Highlights
 
Approximately 120,000 people in the UK were victims of identity fraud in 2004, a figure that has dramatically increased in recent years. The number of cases of identity theft increased by 37 per cent in 2003 and by 19 per cent in 2004.
 

 
Reasons to Purchase
 
Understand the scale of the identity fraud problem in the UK
 
Identify who is offering this type of cover and how they are selling it
 
Gain insight into the factors that are going to affect the future development of this market

TABLE OF CONTENTS
 
ABOUT DATAMONITOR 2
 
CHAPTER 1 IDENTITY FRAUD IN CONTEXT 7
 
Introduction 7
 
Approximately 120,000 people in the UK were victims of identity fraud in 2004, a figure that has dramatically increased in recent years 7
 
There was a 19 per cent increase in cases of identity fraud in 2004 7
 
CIFAS has identified five principal drivers behind the rapid increase in identity fraud 8
 
Identity fraud accounts for almost 10 per cent of the total economic cost of fraud 9
 
Credit card identity fraud alone is a £36.9 million problem 10
 
There is more than just a financial cost to identity fraud 12
 
CHAPTER 2 THE INSURANCE PRODUCT 13
 
Introduction 13
 
Identity fraud insurance is currently being offered in three different forms 13
 
The level of assistance provided is the key product differentiator 14
 
Consumer reaction to date has been positive 14
 
Barclays and HBOS are among the leading credit institutions offering this form of cover 15
 
HBOS entered the market in August 2004 15
 
Barclays entered the market in December 2004 15
 
Capital One’s free identity assistance service was the first of its kind in the UK 15
 
CHAPTER 3 THE CASE STUDY: THE US 17
 
Introduction 17
 
Identity fraud insurance originated in the US as over 10 million people a year fall victim to this crime 17
 
The scale of the identity theft problem in terms of cost and timespend is substantial 18
 
It costs the US economy an estimated $47.6 billion a year 18
 
The total cost to victims in out-of-pocket expenses was $5 billion 18
 
Almost 300 million hours in total were spent trying to solve the problems arising as a result of identity fraud 19
 
A victim’s journey 19
 
Driven by the increase in identity theft, the number of players in the market has doubled since 2003 21
 
CHAPTER 4 THE FUTURE DECODED 22
 
Introduction 22
 
Factors that will drive market growth 22
 
Increasing consumer awareness of the threat of identity fraud and the benefits of the policy will be key 22
 
The introduction of chip and pin is expected to result in an increase in identity theft, which should positively affect sales 23
 
Offering it as an add-on to either a credit card or a home policy is likely to be the most effective sales strategy 23
 
Cost is likely to be a deciding factor in the purchase process 23
 
Factors that will limit market growth 24
 
People’s reluctance to purchase non-compulsory insurance 24
 
The success of free identity assistance products will affect the insurance element of the market 24
 
The effect of certain factors on the market is unclear 24
 
Opinion is mixed over the impact that identity cards would have on the market 24
 
The media’s view on whether or not this form of cover is necessary 25
 
Identity fraud insurance to remain a niche product for the wealthy? 25
 
CHAPTER 5 APPENDIX 26
 
Research methodology 26
 
Current publications 26
 
Future publications 26
 
Relevant links 26
 
Do you need more information? 27
 
SPP writing team 28
 

 

 

 

 

 
LIST OF TABLES
 
Table 1: The number of cases of identity and impersonation fraud in the UK, 1999-2004 8
 
Table 2: Identity theft losses on UK-issued cards, 1999-2004 12
 
Table 3: Number of victims of identity theft in the US, 2003 18
 
Table 4: Cost of identity fraud in the US, 2003 19
 
Table 5: Hours victims spend resolving the problems arising from identity theft in the US, 2003 19
 
LIST OF FIGURES
 
Figure 1: The total amount lost on UK-issued cards reached £36.9 million in 2004 11
 
Figure 2: Datamonitor’s core consulting capabilities 28