Fraud costs Britons almost £16 billion annually

Article date: 24 November 2005

New calculations reveal that fraud now costs the UK a staggering£16* billion a year but Britons are still in the darkabout the real cost of fraud and its true impact onsociety.

Fraudulent crime has increased by 15% in the last five years andinsurer Norwich Union predicts this will escalate significantly inthe next five.

Although 80%** of people don’t believe thatthey have ever been a victim of fraud - Norwich Union hascalculated that fraud costs the average household £650 a year or£340 per adult.*** The insurer has also estimated thatover £11 billion was lost by the public sector in 2004 due tofraud.

Norwich Union is exposing the growing issue of fraud to changethe attitudes of the public and to support the Police Authoritiesin encouraging the Government to recognise the severity offraudulent crime.

As well as the financial drain of fraud there is also a growingsocial cost. Major fraudulent scams fund other forms of organisedcrime such as drugs trafficking, vehicle theft, people trafficking,gun running and even terrorism. In the last three years there hasbeen a marked increase in the volumes of detected organised fraudcrime and it is estimated that organised crime now earns as muchfrom 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 £103million in 2004 by identifying fraudulent insurance claims. Howeverdespite better detection systems, just 18 out of the 4,000 mostserious frauds identified resulted in criminal prosecutions. All 18resulted in convictions but more than half of these resulted incautions, or non custodial sentences.

Chris Hill, head of fraud, said: “Many people believe thatfraud is a victimless crime but major insurance fraud scams arebecoming more common with members of the public and emergencyservices unwittingly being involved. From staged car-crashes withinnocent drivers to arson attacks on businesses and homes, innocentlives are being put in danger because of fraud. Norwich Union hasdetected more than 300 such frauds in the last 12 months but wesuspect this is just the tip of the iceberg.

“As long as fraud is perceived as an ”easycrime”, we will consistently see organised gangs of criminalfraudsters escaping prosecution and coming back for a second orthird go. We need a moral change in national perception; fraud mustbecome as unacceptable as any other form of theft in the eyes ofthe public.”

Norwich Union also reveals:

  • fraud now equates to 1.4% of the UK’s Gross DomesticProduct
  • Fraud losses are the equivalent to 6p in the £1 on the basicrate of income tax*****

Chris Hill continued: “The proceeds of fraud are directlyfunding crime on the streets but there is an absence of a cohesiveNational Fraud Strategy to tackle this. To turn this around, thepublic and private sectors need to actively collaborate togetherwith Government and law enforcement bodies.”


Media contacts
QBO Bell Pottinger:
Charlotte Speedy, 020 7861 2486,
Sarah Street, 020 7861 2428,

Norwich Union:
David Ross, 01603 682730,

Notes to editors

* NUI figures – See Appendix One
** Norwich Union research data [details of consumer survey TBC withAC]
*** Office of the Deputy Prime Minister and National StatisticsOffice – 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 marketshare of around 14 per cent.
  • With a focus on insurance for individuals and smallbusinesses, 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 ofdistribution channels including brokers, corporate partners suchas banks and building societies and Norwich Union Direct.
  • Norwich Union’s news releases and a selection of imagesare available from Aviva’s internet press centre at

Appendix One
Cost of fraud to the UK
In 1999, the Home officecommissioned a one off survey which was published in 2000. It hasnot been updated since. In producing our revised estimate, NorwichUnion has used the same overall framework and sought updates fromthe original sources. Where updates were not available, we revertedto the 1999 home office data, which (due to its age) is likely tobe an underestimate, and applied a 12.4% modifier to reflect theimpact of inflation. The table below therefore represents an up todate 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 ofthe base data used is listed in brackets.

2004 - Private Sector –direct costs

Insurance fraud - PersonalLines (ABI) 2004


Insurance fraud -Commercial Lines (NU estimate) 2004


Card Fraud (APACS) 2004


Banking fraud (BBA) 2004


Ernst + Young Survey(NERA) 1999


KPMG Fraud Barometer(KPMG) 2004


Commercial victimisationsurvey (NERA) 1999


SFO (Home Office) 1999


Sub total


2004 - Public sector– direct costs

Benefits fraud (HomeOffice + adjustment based on NERA) 2004


Civil Service employeefraud (NERA) 1999


Customs fraud (C & E)1999                           


Fraud against localauthorities (Home Office) 1999


Fraud against the NHS(NHS) 2004               


Inland Revenue                                 


Tax fraud / distortion(Home Office) 1999


Sub total                                                             


Indirect estimatedcosts

Private sector - 1999 HomeOffice estimate


Public sector 1999 HomeOffice estimate


Sub total                                                             


Economic cost of Fraud to UKPLC in 2004



 This equates to:

  • 59.8 million people, therefore cost per person£264
  • 46.4 million adults (77.9% of population), thereforecost per adult £340
  • 24.1 million households (Dep PMs Office) thereforecost per household £655
  • GDP = £1164439m, so percentage of GDP1.4%
  • At least as profitable for organised crime as drugstrafficking, and used to fund other forms of organised crime(NCIS)

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