news release

Experian report reveals the changing face of fraud in the UK

Nottingham, 19 March 2010 — Experian®, the global information services company, today published its latest Insight Report, detailing how frauds attempted against UK financial institutions and their customers is on the increase and that the nature of the threat is rapidly evolving.

Key trends identified in the report include an increase in identity fraud as organised criminals move into the mass-market, and a surge in first-party fraud as consumers hit hardest by the recession attempted to obtain credit and other financial services they were not entitled to. Furthermore, the report suggests that mortgage and insurance providers could be hit to the tune of £1.2 billion and £2.5 billion worth of fraud respectively in 2010.

Organised crime turning to the mass-market for identity fraud victims

Over 5,000 identity fraud victims sought help from Experian reclaiming their identities during 2009, nearly a 20 per cent increase on 2008. Information collated through the National Hunter fraud data sharing scheme, operated by Experian, indicates that even greater numbers will seek assistance during 2010. 72 per cent of identity fraud attempts in 2009 occurred during the second half of the year. 

Experian’s analysis of fraud data using its Financial Strategy Segments (FSS) classification reveals that while the wealthiest sections of society continue to be at high risk of identity fraud, fraudsters are increasingly looking to the mass-market for victims (see Table 1).

Corporate Top Dogs – company directors and business owners at the pinnacle of successful careers – are at greatest risk of identity fraud than any other group. Their Risk Index Score[1] (RIS) of 306 was the highest of any single demographic seeking help from Experian in 2009.

Young couples, singles and rented home sharers were increasingly seeking help during the same period as fraudsters sought to commit high-volumes of low value frauds using the identities of more easily impersonated victims. Those Looking to the Future (RIS 268, young singles living in shared rented accommodation) and Getting by Alone (RIS 162, young singles and single parents living in low value properties) are now also amongst the highest risk groups. Experian expects that the fraudsters’ move into the mass-market will accelerate during 2010.

With high concentrations of the most targeted groups, London’s Knightsbridge (RIS 401), Brompton Road (RIS 398) and Blackwall (RIS 393) areas are prime locations for identity fraud activity (see Table 2). Outside of the capital, new-build locations with a large rental sector, including Salford’s Quays development (RIS 390), Manchester’s Liverpool Street (RIS 352) and Cardiff’s dockside regeneration area (RIS 334), are also vulnerable.

First-party fraud levels on the rise, fuelled by financial stress

Experian’s report reveals that first-party fraud, which occurs when individuals manipulate their own information attempting to obtain financial services they are not entitled to, surged from around 28 per cent of all fraud cases in the first three quarters of 2009 to 46 per cent in the fourth quarter, at a time when identity fraud levels also grew. Experian's fraud experts believe that unemployment and lower levels of lending will result in further growth in first-party fraud rates throughout 2010.

Analysis of data collected through the National Hunter fraud data sharing scheme reveals a cluster of first-party fraud hotspots around the East End of London. Shadwell, Stepney, East Ham, Walthamstow, Woolwich, Peckham and Barking saw far higher than average instances of first-party fraud attempts, as did other London districts such as Streatham and Willesden. Outside of London, there were hotspots in the less affluent parts of Chatham, Leicester, Birmingham and Bolton (see Table 2).

According to Experian’s analysis, those living close to the poverty line, as well as young people in the early stages of setting up home, are most likely to attempt this kind of fraud (see Table 3).  The Child-raising Challenge demographic – single parents often relying solely on benefits and struggling with debt repayments – makes up less than four percent of the UK population, but is responsible for almost 11 percent of attempted first-party frauds in 2009. Likewise, Looking to the Future – young singles living in shared rented accommodation – accounts for less than three percent of the population, but more than eight percent of attempts.

Mortgage and insurance providers to be key targets for fraudsters in 2010

Experian’s report predicts that mortgage and insurance providers are likely to bear the brunt of fraud attacks during 2010.

Mortgage fraud rates have remained fairly steady at 20 frauds in every 10,000 applications since early-2008, rising in line with new applications. Experian’s fraud experts believe that mortgage providers will see fraud rates increase in 2010 due to the continued shortage of sub-prime and self-certification mortgages and increasing demands to re-mortgage emanating from the last batch of pre-crunch mortgage holders coming off three-year fixed-term interest deals. Fraud losses in the mortgage sector could reach £1.2 billion in 2010[2].

Experian’s report shows that insurance fraud rates almost doubled in the final quarter of 2009, from nine detected frauds in every 10,000 applications in quarter three, to 16 in quarter four. Insurance fraud rises in difficult economic times as financially stressed consumers increasingly claim on home insurance to gain goods which they can no longer afford to replace. With uncertainties over the economy likely to result in unemployment remaining higher for longer, Experian estimates that general insurance fraud losses could reach £2.5 billion during 2010[3].

Nick Mothershaw, Director of Fraud and Identity Solutions at Experian, comments: “Attempted fraud is on the increase and the nature of the threat is changing. Organised criminal fraudsters are moving into the mass-market, looking beyond those with obvious wealth towards lower-value but more vulnerable targets. At the same time, financial stress brought about by the recession is driving increasing numbers of people to commit fraud to maintain their lifestyles.

“As a result, financial institutions could be faced with sustained fraud attacks during 2010.  The volume and intensity of attempts will continue to grow and organisations must be prepared to ensure that they can most effectively manage the risk this exposes them to.

“Our report shows that the fraud threat is continually evolving and the associated losses have a direct impact on profitability. Consumers can help protect themselves against the devastating effects of identity fraud by monitoring their credit reports. Financial institutions need to take a more holistic approach to fraud, including sharing fraud data with other firms and ensuring that robust controls are in place across the business.”

Table 1: FSS consumer types most at risk from identity fraud in 2009

2009 rank

Type

Description

Risk index score

1

Corporate Top Dogs

Company directors and business owners. Very wealthy individuals at the pinnacle of successful careers

306

2

Up & Coming Elite

High-flying graduates privately renting in good areas while they pay off student debts and save for a mortgage deposit

293

3

Looking to the Future

Young singles often in shared rented accommodation earning reasonable wages and optimistic for the future

268

4

Cream of the Crop

Highest income earners in premium price city flats and residences

265

5

Greys in the Pink

Wealthy retired couples with high disposable income generated from their investments

192

6

Family Focused Finance

Busy, young families doing well. They have high child-related costs, little time for financial planning, a few savings and some debts.

190

7

Opportunities & Overdrafts

Young, cohabiting couples and friends currently relying on overdrafts but with future potential

188

8

Asset-rich Achievers

Professionals who have had successful careers and are now approaching retirement. Likely to be in a senior management position with the salary to match

172

9

Fully Committed Funds

Heads of families with considerable incomes but with a very large mortgage leaving little spare to save

167

10

Getting by Alone

Young singles and single parents getting by with limited income in low value properties.

162

Source: Experian Victims of Fraud Survey (Mar-10)

 

Table 2: Fraud hotspots

Most active areas for first-party fraud in 2009

Areas most-at-risk from identity fraud

2009 rank

Area

% of frauds

2009 rank

Area

Risk index score

1

East Ham

0.60%

1

Kinnerton Street, London

408

2

Woolwich, Plumstead

0.48%

2

Park Street, London

407

3

Whitechapel, Stepney, Mile End

0.41%

3

Knightsbridge, London

401

4

Chatham, Kent

0.40%

4

Hill Street, London

400

5

Washwood Heath, Ward End, Saltley

0.40%

5

Brompton Road, London

398

6

Streatham, Norbury

0.40%

6

Macmillan Way, London

397

7

Barking

0.38%

7

Chancellor Passage, Canary Wharf, London

396

8

Birstall, Belgrave, Beaumont Leys, Thurmaston

0.38%

8

Lennox Gardens, London

396

9

Northolt

0.37%

9

South Audley Street, London

395

10

Bolton, Little Lever

0.37%

10

Blackwall, London

393

Source: National Hunter & Insurance Hunter / Experian

Source: Experian Victims of Fraud Survey

 

Table 3: FSS consumer types most associated with first-party fraud attempts in 2009

2009 rank

Type

Description

% of frauds

% of popul-ation

1

Child-raising Challenge

Vulnerable single parents relying on benefits and struggling with debt repayments. Manchester, Birmingham and Nottingham have high populations of this type.

10.62%

3.76%

2

Looking to the Future

Young singles often in shared rented accommodation earning reasonable wages and optimistic for the future. Commonly found in areas of London.

8.83%

2.62%

3

Hocked to the Hilt

Young families with low income seeking credit from many sources to sustain their lifestyle. High populations of such types in Northern Ireland and central Nottingham.

6.53%

3.59%

4

Straining the Budget

Young singles, often with children, on low income in rented council properties. West Bromwich and central Nottingham have large populations of this group.

5.84%

3.32%

5

Getting by Alone

Young singles and single parents getting by with limited income in low value properties. Both Colchester and Bristol have large numbers of such types.

5.36%

3.44%

6

Limited Livelihoods

Singles in their 30s in mostly council flats. Unemployment is a problem but debts are usually controlled. There are high numbers of this type in London’s Stratford and Lewisham areas.

4.40%

1.75%

7

Poor Prospects

Very poor singles with few prospects living in council flats; many are unemployed or have only part time, low paid work. The central areas of Manchester and Newcastle upon Tyne have large populations of such groups.

3.84%

2.35%

8

Carefree Kick-off

Homesharers making the most of their youth in small, private rented flats. Often found in areas of Edinburgh, Brighton and Glasgow.

3.78%

2.36%

9

Savvy Big Spenders

Young families with big mortgages for their income, they take advantage of deals to save money but have a high level of spending. There are high populations in Norwich and Bristol.

3.57%

3.05%

10

Downscale Mortgagees

Young mortgaged families in the lowest value properties. Low earning power, loans and no savings mean finances can be stretched. Nottingham and Mansfield have large populations of this group.

3.51%

1.80%

Source: National Hunter and Insurance Hunter / Experian (Mar-10)


ENDS

Contact:

Chantal Heckford / Jennifer Comerford / Duncan Skehens
Lansons Communications
020 7490 8828
chantalh@lansons.com / jenniferc@lansons.com / duncans@lansons.com

About Experian
Experian is the leading global information services company, providing data and analytical tools to clients in more than 65 countries. The company helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.

Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended 31 March 2009 was $3.9 billion. Experian employs approximately 15,000 people in 40 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; Costa Mesa, California; and São Paulo, Brazil. 

For more information, visit http://www.experianplc.com.



[1] Index shows level of risk, where 100 = UK average.

[2] Figures calculated by extrapolating known growth in fraud attempts against Experian/National Hunter mortgage provider clients in 2009 and fraud expert predictions for 2010 against industry estimates in the National Fraud Authority report on the value of fraud perpetrated against mortgage providers in 2008.

[3] Figures calculated by extrapolating known growth in fraud attempts against Experian/Insurance Hunter clients in 2009 and fraud expert predictions for 2010 against 2008 figures from The Association of British Insurers.

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