Identity theft: Is ID fraud insurance worth taking?
Thursday, 15 October 2009 02:40
Identity fraud is a big worry for consumers, according to a recent survey, with 76 per cent of UK adults concerned about becoming a victim and 39 per cent feeling more at risk now than six months ago.
Consumers have every reason to be worried, fraud prevention service Cifas says. The overall number of identity frauds has increased by 33 per cent in the first nine months of 2009 from 2008, a new report states.
Account takeover fraud - where fraudsters assume the identity of a victim to drain their existing account - is on the up, as application fraud is proving less lucrative in these credit crunched times.
"As credit granting diminished during the credit crunch, fraudsters saw the writing on the wall and turned their attention away from application fraud, knowing that this would present fewer and fewer opportunities.
"Instead, fraudsters have reacted to economic circumstances, and migrated towards identity fraud and account takeover fraud," Cifas notes in the report, The Anonymous Attacker.
The financial services industry has taken steps to tackle the problem, but the statistics show more needs to be done.
One solution offered by several banks and credit card providers is ID theft protection.
Sarah Routledge investigates how useful these products are and how consumers can best protect themselves against this growing threat.
Credit monitoring
Credit reference agencies Experian, Callcredit and Equifax will each monitor your credit record and alert you when any application for credit is made in your name. There is also unlimited access to your credit report online or by post whenever you request it, and you receive a quarterly statement detailing your credit activity.
If you do find yourself a victim of fraud, there is access to a team of dedicated specialists who will help you clear your name.
Equifax charges £7.50 a month, Callcredit charges £12 a quarter and Experian charges £6.99 a month.
"With the online service we provide, you can check your credit report every day, but I would recommend at least checking every few months," says Mark Ward, head of consumer services for Callcredit.
"With our monitoring service you get peace of mind because we let you know if anything changes, by SMS or email. And if something is wrong, we've got a dedicated victim of fraud team who will take you through all the steps you require to put it right."
This service could be quite useful, especially if you have been a victim of fraud or suspect you could be vulnerable to an attack. Finding out quickly about a fraud is important and could save a lot of hassle.
But if you have no reason to suspect you might be at risk, consider asking for your statutory report every now and again instead.
Every credit reference agency has to supply you with your basic report, for the cost of £2. Even ordering a basic report once a month is cheaper than the services the agencies offer.
And if you only want to check it as a one-off, you can do it for free by signing up for a 30-day trial, cancelling your subscription before the trial ends.
Card protection
When issuing a debit or credit card, the provider may suggest signing up for card protection. Lloyds TSB offers their version, Sentinel for £20 a year; Halifax offers Card Care for £18 a year; specialist insurer CPP charges £29 a year.
Policies vary on their coverage, but generally offer to stop all your cards with one phone call; cover any money lost as a result of fraud to a certain amount; and get you emergency cash quickly. Some will also replace documents such as passport and driving licences, or even your bag or wallet.
But don't feel pressured into buying one of these policies if you are offered one by your bank.
Offering to insure money stolen as a result of fraud sounds appealing, but under the Banking Code you are only liable for the first £50 before reporting the fraud, and nothing afterwards.
You must have taken good care of your card and PIN, but it is up to the bank to prove you have acted without reasonable care, not up to you to prove you have been sensible.
As for replacing lost cash or documents, if you have included personal belongings on your home contents cover, you may already be insured for this event, while a good travel insurance policy will cover lost or stolen cash abroad, and should also include an emergency advance.
ID theft insurance
Typically, ID theft insurance costs from £20 a year and covers the costs incurred in clearing your name once identity fraud has occurred.
These can range from taking time off work to talk to the police, the cost of registered mail in relation to the fraud, the loss of loan application fees if you are turned down because of the fraud, and defending yourself from debt collectors.
The important thing to remember with these policies is they only cover you for the cost of sorting out the mess - not for any money stolen from you as a result.
It is true that in some situations you may incur legal fees to clear your name, but if you have legal expenses insurance included on your home insurance policy, you may not even need a standalone policy. Check with your current insurer to find out what you are covered for.
Low-cost ways to protect yourself
The two main types of ID fraud is account takeover and application fraud. In an account takeover, the fraudster finds a way of accessing your account, by intercepting post or cloning your card.
Prevent this from happening by shredding any document you are throwing away that could be used as identification, and have your post redirected when you move.
Check your bank account regularly - this is easy if you have online banking. Sometimes fraudsters will remove small amounts rather than take everything at once to avoid suspicion, so query any transaction you do not recognise with your bank immediately.
In application fraud, the fraudster uses your good credit record to apply for loans or services, but when the bill comes, it has your name on it.
This type of fraud often does not come to light until you have applied for credit and have been turned down; or mysterious letters start arriving from debt collectors demanding payment for products you never had.
This can take some time to sort out but technically it is the companies who have been defrauded, not you. The potential damage to you is on your credit record, so the first thing to do is get a copy from a credit reference agency and find out what credit has been applied for in your name.
The credit agencies themselves should be able to help with this, as they all have advisers who can tell you what steps to take, and after an agreement between all the agencies you now only have to phone one and it will inform the others.
Once you have cleared your name, there is a way to protect yourself from further attacks by signing up to Protective Registration with Cifas. This service costs £12 a year and adds a warning to your credit file.
Cifas members who see this filing will undertake extra checks to ensure any future credit applications are genuine.
Most importantly of all, protect your details. Fraudsters are notorious for knowing exactly how to exploit the fear of identity theft and routinely send out emails purporting to be from your bank or building society, claiming you are at risk of fraud and requesting your details.
Your bank will never phone or email you asking for any security details and if you give out this information, unfortunately you will be seen to be at fault.
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