Since the start of the Covid-19 pandemic, the number of fraud incidents has increased by almost a quarter (ONS, 2021). With this significant increase in recent years, it is natural to ask: what is the impact of this? The financial harm from being scammed is well documented, with organisations such as Action Fraud providing statistics on the losses reported to police and financial institutions.
However, a second impact from being scammed is rarely mentioned – the emotional impact that a fraud victim experiences. Without a quantitative figure, the total harm caused by fraud is likely to be an underestimate. Public policy is therefore unlikely to reflect the total harm caused by fraud. In light of this, we at Simetrica-Jacobs, on behalf of consumer watchdog Which?, set out to quantifiably demonstrate the impact that being scammed has on wellbeing.
To do this, we made use of the Crime Survey for England and Wales (CSEW). This survey, conducted annually by the Office for National Statistics (ONS), measures the level of and types of crime in England and Wales by asking a random subset of the population to recall crimes that they have been victim to in the past year.
As well as asking about previously experienced crimes, a subset of respondents (around 25%) were asked four ONS-recommended questions relating to their wellbeing. This included asking respondents to rate their life satisfaction, happiness, sense of worthwhileness and anxiety on a 0-10 scale. Of these, we took life satisfaction as our core measure as it is evaluative and has a large body of evidence supporting its validity and rigour (Waldron, 2010). The existence of these questions meant we could employ ‘wellbeing valuation’, a technique recommended in HM Treasury’s Green Book, to estimate the association between being scammed and life satisfaction.
Our analysis shows that being a victim of fraud is associated with a statistically significant decrease in one’s life satisfaction of 0.168 units on a 0-10 scale. But what does this mean? This figure on its own is quite abstract – is this effect large or small? To put this into perspective, we monetised this decrease. This puts the impact into concrete terms and allows the wellbeing impacts of being scammed to be compared to the financial loss that one experiences.
Following best-practice guidance from HM Treasury and using an unbiased estimate of the impact of income on one’s life satisfaction (Fujiwara & Dass, 2021), we monetised the change in life satisfaction associated with being scammed and found that fraud victims would require £2,509 of extra income, on average, to have a level of life satisfaction equivalent to what would be expected had the person not been scammed. In other words, the average fraud victim would require £2,509 to compensate them for the loss in wellbeing that’s associated with being scammed. (For comparison, this is broadly in line with the impact of being threatened, which we found decreased one’s life satisfaction by 0.24units and required compensation to the tune of £3,729.)
What do these results tell us? Aggregating the per-person impact to the total number of fraud victims in the year ending March 2020 (3.7million (ONS, 2020)), we estimate the total wellbeing loss suffered by victims of fraud to be £9.3 billion in a single year. This is far greater than the annual financial fraud losses reported by Action Fraud in the 12 months ending September 2021, which was estimated to be £1.8 billion.
This is critical, as it suggests that, up until now, the total impact of fraud has been severely underestimated. Now that these impacts have been estimated, it is clear that fraud victims need proper support in the aftermath of being scammed and that businesses, including online platforms, telecommunications providers and others, all have a role to prevent victimisation from occurring in the first place.
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Fujiwara, D. and Dass, D. (2021). Incorporating LifeSatisfaction into Discrete Choice Experiments to Estimate Wellbeing Values for Non-Market Goods. Simetrica-Jacobs Research Paper July 2021.
ONS (2020). Crime in England and Wales: year ending March 2020.
ONS (2021). Crime in England and Wales: year ending March 2021.
Waldron (2010). Socioeconomic Rights and Theories o fJustice. NYU School of Law, Public Law Research Paper No. 10-79.