First party fraud: Harmless ‘friendly’ fraud or a hurtful and callous crime?

Recent Cifas research revealed that 1 in 8 UK people admitted to having perpetrated one or more types of first party fraud. A crime which involves an individual presenting false information or misrepresenting their identity in order to gain, first party fraud is too often deemed as ‘acceptable’ to commit. 

Exploring how this type of crime impacts the telco sector – especially as our research showed an eighth (13%) of respondents thought mobile phone insurance fraud was ‘reasonable’ to commit – Sky UK duo, Andy Mayo, Head of Fraud, and Credit Risk Lead Glenn Rumbol, explore how even just one act of first party fraud can result in a high cost to many, in particular consumers. 

Fraud often grabs headlines, and for all the wrong reasons. It’s clear; fraud is not only a blight on our economy, but it can have much more severe consequences – often more impactful than may be immediately apparent. With private sector fraud losses estimated at £157.8 billion¹, this issue affects us all, not just in theory, but in our wallets. 

The overlooked reality of first party fraud 

First party fraud doesn’t make headlines like identity theft, but that doesn’t make it any less serious. The victims and motives are usually very different. With third-party fraud, the casualty is an unsuspecting participant who gets stuck with debt in their name for an application for credit they never made. When it’s first party fraud, it’s often dismissed as being ‘victimless’ or harmless. The reality is that it’s anything but – it’s your bank, your insurer, your telecoms company, or even the Government who bear the brunt of these losses, and this translates into higher costs for all consumers. 

Whether it’s exaggerating details to secure a loan, lying to get a cheaper insurance premium, taking out a mobile contract with no intention of paying, or failing to disclose a prior address where you have unsatisfied debt, one thing is clear, first party fraud leaves a costly trail. This isn’t about those who fall into financial hardship; lenders have safeguards for that. The Insurance Fraud Bureau² estimates that fraud adds £50 to the total cost of each household insurance policy. Who pays for this additional cost? Ultimately, everybody else pays when the fraudster doesn’t. 

The troubling normalisation of fraud 

Research from Cifas³ exposes an alarming trend: a staggering 15% of UK consumers know someone who has taken out mobile phone insurance after damaging their shiny new phone. Almost 20% of respondents didn’t realise it was illegal. This means that 1 in 7 of us know someone who has performed this act, however 4 in 5 of us know this is illegal.  

The real consequences 

When fraud is detected, it can have serious personal outcomes. Offenders face litigation, County Court Judgements (CCJs) and even criminal convictions which could lead to prison time. Increasingly, companies – like Sky – are reporting these fraudsters to the National Fraud Database managed by Cifas⁴. This may impact their ability to access banking or insurance services in the future, or even harm their current or future job prospects as their offence could come to light through employment background checks. 

No such thing as a victimless crime 

First party fraud isn’t a victimless crime. It isn’t a harmless mistake. It has real intent behind it – an intent to leave everyone else with the bill. It’s a crime that affects everyone, and it’s everyone that ultimately pays the price. If you ever hear of someone considering or performing this sort of fraud, just pause and ask yourself, is it really worth the risk? Is it reasonable and legal? And of course, how much is it going to cost you? 

1 Taken from Annual Fraud Indicator, by Crowe, Peters & Peters, and University of Portsmouth: https://www.crowe.com/uk/insights/annual-fraud-indicator 

2 Taken from IFB: https://www.insurancefraudbureau.org/insurance-fraud/why-report-fraud 

3 https://www.cifas.org.uk/is-it-okay-to-commit-fraud 

4 https://www.cifas.org.uk/fraud-prevention-community/member-benefits/data/nfd