New calculations reveal that fraud now costs the UK a staggering £16* billion a year but Britons are still in the dark about the real cost of fraud and its true impact on society.
New calculations reveal that fraud now costs the UK a staggering Ł16* billion a year but Britons are still in the dark about the real cost of fraud and its true impact on society.
Fraudulent crime has increased by 15% in the last five years and insurer Norwich Union predicts this will escalate significantly in the next five.
Although 80%** of people don’t believe that they have ever been a victim of fraud - Norwich Union has calculated that fraud costs the average household Ł650 a year or Ł340 per adult.*** The insurer has also estimated that over Ł11 billion was lost by the public sector in 2004 due to fraud.
Norwich Union is exposing the growing issue of fraud to change the attitudes of the public and to support the Police Authorities in encouraging the Government to recognise the severity of fraudulent crime.
As well as the financial drain of fraud there is also a growing social cost. Major fraudulent scams fund other forms of organised crime such as drugs trafficking, vehicle theft, people trafficking, gun running and even terrorism. In the last three years there has been a marked increase in the volumes of detected organised fraud crime and it is estimated that organised crime now earns as much from fraud as from drugs. ****
In practical terms the growing increase in fraud could mean:
- Direct personal financial losses
- Increased taxes and reduced services
- Increased costs to goods and services
- Failed businesses
- Growing levels of serious street crime
- Lost value to investments and pensions
- Lost jobs
Norwich Union has saved policyholders and shareholders over Ł103 million in 2004 by identifying fraudulent insurance claims. However despite better detection systems, just 18 out of the 4,000 most serious frauds identified resulted in criminal prosecutions. All 18 resulted in convictions but more than half of these resulted in cautions, or non custodial sentences.
Chris Hill, head of fraud, said: “Many people believe that fraud is a victimless crime but major insurance fraud scams are becoming more common with members of the public and emergency services unwittingly being involved. From staged car-crashes with innocent drivers to arson attacks on businesses and homes, innocent lives are being put in danger because of fraud. Norwich Union has detected more than 300 such frauds in the last 12 months but we suspect this is just the tip of the iceberg.
“As long as fraud is perceived as an ”easy crime”, we will consistently see organised gangs of criminal fraudsters escaping prosecution and coming back for a second or third go. We need a moral change in national perception; fraud must become as unacceptable as any other form of theft in the eyes of the public.”
Norwich Union also reveals:
- fraud now equates to 1.4% of the UK’s Gross Domestic Product
- Fraud losses are the equivalent to 6p in the Ł1 on the basic rate of income tax*****
Chris Hill continued: “The proceeds of fraud are directly funding crime on the streets but there is an absence of a cohesive National Fraud Strategy to tackle this. To turn this around, the public and private sectors need to actively collaborate together with Government and law enforcement bodies.”
-ends-
Media contacts
QBO Bell Pottinger:
Charlotte Speedy, 020 7861 2486, cspeedy@qbo-bellpottinger.co.uk
Sarah Street, 020 7861 2428, sstreet@qbo-bellpottinger.co.uk
Norwich Union:
David Ross, 01603 682730, david-ross@norwich-union.co.uk
Notes to editors
Research notes
* NUI figures – See Appendix One
** Norwich Union research data [details of consumer survey TBC with AC]
*** Office of the Deputy Prime Minister and National Statistics Office – 59.8m population, 46.4m adults [77.9% of population] and 24.1m households
**** NCIS figures
***** Institute of Fiscal Studies
About Norwich Union
- Norwich Union is the UK’s largest insurer with a market share of around 14 per cent.
- With a focus on insurance for individuals and small businesses, Norwich Union insures:
- one in five households
- one in seven motor vehicles
- more than 800,000 businesses
- Norwich Union products are available through a variety of distribution channels including brokers, corporate partners such as banks and building societies and Norwich Union Direct.
- Norwich Union’s news releases and a selection of images are available from Aviva’s internet press centre at www.aviva.com/media
Appendix One
Cost of fraud to the UK
In 1999, the Home office commissioned a one off survey which was published in 2000. It has not been updated since. In producing our revised estimate, Norwich Union has used the same overall framework and sought updates from the original sources. Where updates were not available, we reverted to the 1999 home office data, which (due to its age) is likely to be an underestimate, and applied a 12.4% modifier to reflect the impact of inflation. The table below therefore represents an up to date estimate of the economic cost of fraud to the U K in 2004, compiled on the same basis as the 2000 Nera report. The source of the base data used is listed in brackets.
2004 - Private Sector – direct costs
| Insurance fraud - Personal Lines (ABI) 2004 | Ł1000m |
| Insurance fraud - Commercial Lines (NU estimate) 2004 | Ł550m |
| Card Fraud (APACS) 2004 | Ł504.8m |
| Banking fraud (BBA) 2004 | Ł107.6m |
| Ernst + Young Survey (NERA) 1999 | Ł112.4m |
| KPMG Fraud Barometer (KPMG) 2004 | Ł329m |
| Commercial victimisation survey (NERA) 1999 | Ł165.5m |
| SFO (Home Office) 1999 | Ł1278.6m |
| Sub total | Ł4047.8m |
2004 - Public sector – direct costs
| Benefits fraud (Home Office + adjustment based on NERA) 2004 | Ł4878m |
| Civil Service employee fraud (NERA) 1999 | Ł2m |
| Customs fraud (C & E) 1999 | Ł2810m |
| Fraud against local authorities (Home Office) 1999 | Ł12m |
| Fraud against the NHS (NHS) 2004 | Ł78m |
| Inland Revenue | Ł22m |
| Tax fraud / distortion (Home Office) 1999 | Ł2088m |
| Sub total | Ł9890m |
Indirect estimated costs
| Private sector - 1999 Home Office estimate | Ł176m |
| Public sector 1999 Home Office estimate | Ł1669m |
| Sub total | Ł1844m |
Economic cost of Fraud to UK PLC in 2004
| Total | Ł15,781m |
This equates to:
- 59.8 million people, therefore cost per person Ł264
- 46.4 million adults (77.9% of population), therefore cost per adult Ł340
- 24.1 million households (Dep PMs Office) therefore cost per household Ł655
- GDP = Ł1164439m, so percentage of GDP 1.4%
- At least as profitable for organised crime as drugs trafficking, and used to fund other forms of organised crime (NCIS)