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

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

Although 80% of people don’t believe that they have ever been a victim of fraud - Norwich Union has calculated that fraud costs the average household £650 a year or £340 per adult.

The insurer has also estimated that over £11 billion was lost by the public sector in 2004 due to fraud.

Norwich Union is exposing the growing issue of fraud to change the attitudes of the public and to support the police authorities in encouraging the government to recognise the severity of fraudulent crime.

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

Chris Hill, head of fraud, said: "Many people believe that fraud is a victimless crime but major insurance fraud scams are becoming more common with members of the public and emergency services unwittingly being involved. From staged car-crashes with innocent drivers to arson attacks on businesses and homes, innocent lives are being put in danger because of fraud."

"Norwich Union has detected more than 300 such frauds in the last 12 months but we suspect this is just the tip of the iceberg."

"As long as fraud is perceived as an "easy crime", we will consistently see organised gangs of criminal fraudsters escaping prosecution and coming back for a second or third go. We need a moral change in national perception; fraud must become as unacceptable as any other form of theft in the eyes of the public."

Norwich Union also reveals:

• Fraud now equates to 1.4% of the UK’s Gross Domestic Product
• Fraud losses are the equivalent to 6p in the £1 on the basic rate of income tax

Chris Hill continued: "The proceeds of fraud are directly funding crime on the streets but there is an absence of a cohesive national fraud strategy to tackle this. To turn this around, the public and private sectors need to actively collaborate together with government and law enforcement bodies."