Identity-theft insurance is a waste of money. That’s long been our opinion here at Which? But we think that the latest scare tactics employed by some banks are treating customers even worse.
While it’s admittedly distressing if you end up being the victim of ID fraud, true identity theft is not nearly as common as card providers would like us to believe.
Furthermore, the protection for those who are caught out is already pretty good. As long as you’re not negligent, banks and card providers are obliged to pick up the bill if you’re a victim of fraud. So the £60,000 worth of cover that most ID theft insurance policies offer is not necessary.
While there is arguably some merit in having an expert help you out if you’re a victim of ID theft, it’s simply not worth the £60 a year or more that most policies cost.
CPP, which is the dominant player in the ID theft insurance market, says just 0.5% of people with these policies actually make a claim – a good indication of how small the real threat is.
Banks’ tactics treating customers badly
Banks have long been trying to scare their customers into buying ID theft insurance, but the latest tactics are, in our view, a step too far.
Card providers such as Barclaycard, Santander and NatWest are diverting callers who want to activate their new credit card directly through to CPP. Once the call handler has activated the card, they then get the chance to try and sell an ID theft insurance policy to the caller.
To my mind, this is a breach of confidence by the card providers. Their customers have no choice but to call up to activate their card – a call which they quite rightly expect to be handled by the provider with whom they have a contract, not by an insurance company salesman. It’s yet another example of banks simply not understanding what treating their customers fairly really means.
There are plenty of products that banks could push that would be good for both customers and their profits. Most people don’t save enough or have enough income protection or life insurance. But we still seem to be a long way from a world where banks work equally as hard for their customers as they do for their shareholders.