Identity fraud insurance


Gordon Martin

With every passing year, more and more people are falling victim to identity fraud. In 2016, there were 172,919 cases of identity fraud in the United Kingdom. By 2017, there were already nearly 90,000 reported cases of identity fraud in the first half of the year. The numbers continue to increase. The number of young people, 30 years old and younger, who have had their identities stolen has been steadily increasing, due to the easily accessible information they provide online. However, every age group is at risk. In the first half of 2017, the ages 21-30, 31-40, 41-50, 51-60 and over 60, all reported between 12,300 and 18,900 cases of identity fraud. Identity fraud is real and dangerous. But if it's so common, why is there such a general lack of understand surrounding what exactly identity fraud is? For those in the dark about identity theft, this guide will set out the risks, ways to mitigate those risks and your insurance options. Use this comprehensive guide to deepen your understanding and stay safe.

What is identity fraud?

Identity fraud is when someone illegally obtains information and uses it to commit a crime or steal your financial identity. Identity thieves typically use your personal information to take out products in your name, like insurance policies, loans, credit cards and bank accounts. But why would anyone want to do this? How could they possibly benefit from pretending to be you? The answer is simple: to gain a financial advantage or acquire credit.

Man types on keyboard

What is identity fraud insurance?

Identity fraud insurance is one way to ensure that, if you do ever fall victim to identity fraud, you won't be too out-of-pocket. Depending on how successful the thief is, you could lose hundreds of thousands of pounds and be faced with a lengthy road to recovering your identity. Identity fraud doesn't just take your money, the negative impact it can have on your financial identity is drastic. Many identity fraud victims have missed out on job opportunities or been denied loans simply because someone had stolen their identity. When dealing with identity theft on your own, you could be faced with other problems such as, threatening letters handling debt collectors and attending court. Identity fraud insurance exists to alleviate some of these stressful issues. All identity fraud insurance policies are different, but they could cover:

  • Phone calls related to handling identity fraud
  • Lost wages
  • Legal fees
  • Credit monitoring services

Do I need identity fraud insurance?

One of the ways to protect yourself from the harsh consequences of identity fraud is by purchasing an identity fraud insurance plan. Unfortunately, there is no straightforward answer to the question of whether you should purchase fraud insurance. Identity fraud insurance can save you the headache that is dealing with recovering your identity, but it's important to remember that these insurance policies typically only cover the costs of recovering your identity, not the amount that you lost as a result of your identity being stolen. Also, many credit card companies and banks offer protection against identity fraud, so long as it didn't occur due to your negligence. However, keep in mind that not all identity theft has to do with your credit card or bank information and the process to recovering your identity can be time-consuming and costly when handled alone.

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Cases of identity theft are on the rise in the UK and across the globe. While there are ways to protect your identity, only using legitimate websites to make online purchases, guarding your credit card information and keeping personal information off the internet- these tips aren't fool proof. Victims of identity fraud could face not only financial hardship, but problems getting a job, qualifying for a loan and so much more. When it comes to identity fraud insurance, it has its fair share of pros and cons. Is it right for you?

The impact of identity fraud

Identity fraud of any nature has consequences for the victim, although the level of severity very much depends on the type of identity fraud committed.

If a fraudster steals your identity to gain access to your current account, debit card or credit cards (i.e. accounts you already have), you are likely to lose all the money associated with those accounts. This will have an immediate impact on your everyday living, leaving you with no money until this can be rectified. In most cases, your bank should refund you if money has been fraudulently withdrawn, unless they can prove the fraud occurred due to your own negligence (such as knowingly sharing your PIN number). This can take some time, however, and there is the potential for a negative effect on your credit file while the damage is repaired. Although frightening and frustrating, the physical effects of fraud on your current accounts may only have a short-term impact if dealt with swiftly.

Watch out for online hackers

When fraudsters steal your identity, with the right documents they can use your details to set up new credit accounts in your name, or even set up bogus companies. Whereas a phishing scam which empties your current account is usually spotted quite quickly, identity scams such as this can take a long time to come to light, especially if you don't check your credit file regularly. This is likely to have more serious long-term consequences, with victims left potentially liable for thousands of pounds of debt which can take the form of loans, credit cards, or even fraudulent benefit claims. If details are used to set up a bogus company, there is the potential to be liable for tax evasion, court fees, and the additional costs of legal representation if required (the burden of proof is unfortunately with the victim in the majority of these cases).

The effect of identity fraud on your credit report

Although possible to correct entries on your credit report caused by financial fraud, the effects on your report can still have a serious and detrimental effect. Using your existing accounts could have a knock-on effect not only on the account entry itself, but if you are left struggling for money, you could be left with missed payments on your phone bill, other credit cards and utility bills. Fraudsters who apply for new lines of credit in your name will also leave a footprint on your credit report, whether the credit is approved or not.

It can take a long time to repair the damage which could be caused to your credit report if you fall victim to a scam. It can be a lengthy process contacting the relevant companies and explaining the circumstances, and during this time you may be turned down for additional credit which may be particularly problematic if you are applying for a mortgage, for example.

What should I do if I think I have been a victim of identity fraud?

The first step you should always take if you think you have been a victim of fraud is to contact your bank or card issuer and explain what has happened. They can immediately stop or cancel any stolen cards or potentially compromised accounts, review any unusual activity, and sometimes help you set up another bank account. If fraudsters have obtained your documents, these should also be reported as stolen. Contact the DVLA immediately if your driving licence has been stolen and ensure a stolen passport is cancelled.

All instances of identity fraud should be reported to the police either directly, or through the Action Fraud website. Action Fraud gather and analyse fraud reports from all over the UK, which is used to help identify and investigate fraudulent crimes.

It is also important for you to obtain a copy of your credit report to check for any fraudulent activity. There are three main credit reference agencies (CRAs) in the UK; Callcredit, Equifax and Experian.

Each CRA holds information from your credit file, however not all companies report to all three main CRAs so it is possible they hold different information. If you have been a victim of fraud, it is worth checking all three to ensure there is nothing amiss. Most are free to view, however there can be a small charge or subscription required for others.

How do criminals obtain my personal information?

There are many ways that criminals can get hold of your personal information. In the United Kingdom, 80% of identity fraud occurs online. However, there are also several offline ways that identity thieves can steal your information. Here are just a few ways fraudsters steal information:

Fraudsters could get the information they need by hacking into your email, social media accounts, online bank and more.

Many of us use our credit cards daily. When your credit card information is exposed to so many people, it can be easy for someone to swipe your information. A good rule of thumb is to never let your credit card out of your sight.

Phishing is one of the most common ways for your identity to be stolen. Don't fall victim to the scam! Phishing is when a criminal poses as a real organisation online and sends you an email asking for detailed personal information.

Some fraudsters will find out when your postman comes and, as soon as he's dropped off your mail, will steal it right out of your letterbox! Watching out for the mailman yourself or installing a lock on your mailbox are good solutions.

Fraudsters are clever. They know that you'll eventually throw away items like bank statements that contain information, so they'll often sift through your rubbish. Before throwing away any documentation that contains personal information like your bank account number, be sure to either shred it or black it out with permanent marker.

Pretexting is when criminals call institutions like banks or utility companies and pretend to be you in order to get more information about you and then steal your identity.

What is Shoulder Surfing?

A criminal doesn't need to have your credit card to commit identity fraud in that way. They could look over your shoulder while you type your PIN in at the ATM and accomplish the same thing. Always cover the keyboard with your hand when entering your PIN.

While there are ways you can protect yourself from identity fraud, the reality is that these fraudsters are smart. You could be as careful as possible and still fall victim to identity fraud. Fraud insurance is one way to protect yourself.


Be safe online, look after your personal property and maintain good data hygiene. These are all top tips to mitigate the risk of ID theft and fraud. Whether you believe insurance is helpful in this quest is down to you but we have shown there to be a whole host of actions to take rather than just relying on one method alone.

You can contact Action Fraud on 0300 123 2040 or through their website.

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