I received an email the other day informing me I had won a million US dollars in an international lottery. All I had to do was file my claim with their ‘fiducially agent’. Perhaps it is just as well con artists like this cannot spell properly. It acts as a warning to the unwary. The Office of Fair Trading says that lottery scams such as this have cost people in the UK around £3 million in the last six months alone. If I had replied I would have been told that to get the prize all I needed to do was to send some money – perhaps a filing fee or tax in advance. If I had been foolish enough to send it, I would have been moved to a list of real suckers and they would have milked me for as much as they could get, without ever of course, sending me any money, until I got suspicious – when they would have clammed up and disappeared.
Lottery scams are just one trade of the cunning crooks trying to steal our money. The Department of Trade and Industry said recently that we have lost around £350 million to what it calls ‘investment scams’ where we are promised high rates of return on unregulated investments such as art, wine, jewellery, property or shares registered overseas.
One scam offered people an investment in ‘works of art’ which they bought for £4000 on the promise that not only would the art rise in value but that local businesses would pay a ‘rent’ of £400 a year to hang the work on their wall. The first payment was made swiftly. But of course the second payment never appeared and the ‘art’ turned out to be a reproduction you could buy for around £150.
Other scams include persuading people to buy derelict property and then pay out for refurbishment that never happens; investing in wine, champagne or whisky that was ‘guaranteed’ to grow in value –but did not; or to buy shares in a gold mine just before anyone else was told that the precious metal had been discovered. In the cold light of day, these all seem like cheap tricks that anyone could see through. But the people selling them are clever, determined, and know how to play on the twin emotions of fear and greed. The people who succumb are unfortunate and careless, but not stupid.
The DTI recently launched its ‘don’t be a mug’ campaign to try to get people to think before parting with their money. The golden rule: if it seems too good to be true, it probably is. And before giving anyone your cash check out who you are buying from, are they regulated, and does it really sound sensible. The same rules that apply to any investment.
Although £350 million is a lot, people have lost more money to regulated and legal schemes – no-one knowns how much has been lost in High Income Guaranteed Bonds for example. But we do know that £5.7 billion was lost by investors in split capital investment trusts. And the pension mis-selling scandal of the 1980s cost the industry £13 billion to put right. The financial services industry sometimes makes the crooks look like beginners.
A price on body parts
A British mum has been propelled into the superstar league after her
employer insured part of her body for £10 million. Angela Mount may not be as
famous as Tina Turner, Marlene Dietrich, or Rod Stewart. But the supermarket
chain Somerfield reckons her taste buds and sense of smell are worth far more
than their legs or voices.
Angela buys the wine for the supermarket chain’s 600 stores. Somerfield claims her super-nose has been responsible for 15% growth in its wine sales which now account for one tenth of the chain’s turnover. That makes it well worth the premium on the £10 million insurance policy. Angela has to pay a price herself though. She is not allowed to smoke or to do any ‘extreme sports’ like bungee jumping or women’s rugby that could damage her nose or tongue.
The policy is with Jonathan Thomas of Creechurch Underwriting. He says that such body part insurance is uncommon. – the biggest group who need pure body part insurance are hand models. Payouts are so rare that Jonathan told Saga Magazine "I am not aware of any definite claim on a pure body parts insurance policy". But because the chance of a claim is always there, premiums are quite high – between £4 and £15 per year per £1000 insured. So a million pound policy would cost you up to £15,000. "It is rare that anyone just needs to insure one faculty or part of their body. It is more common for them to take out a general Permanent Total Disability policy." Other policies operate a sliding scale on the extent of the disability. He recalls ruefully paying an impecunious farmer for losing his right thumb and forefinger at the start of the policy and dropping an anvil on his other three fingers just weeks before it came to an end, giving him the lion’s share of £400,000.
In the 1940s Betty Grable became known as the girl with the million dollar legs after the film studio insured them for that amount. Marlene Dietrich insured her gravelly voice for a similar sum. The 1940s comic Jimmy Durante protected the large nose he called his ‘schnozzola’ for $50,000. And country singer Dolly Parton inevitably has her 42 inch chest insured for a reputed $600,000. Irish dancer Michael Flatley has his legs insured for £25 million – but David Beckham has topped that with a reported £40 million price tag on his, both far higher than Tina Turner’s – more than £1mn each – or Fred Astaire’s $75,000. Jennifer Lopez’s bottom was said to be insured for fabulous sums – part of a $1 billion policy on her body according to the New York Post. But she has now denied her derrière is insured at all. Celebrity chef Anthony Worrall Thompson has his sense of taste insured for £500,000 and the same again for his fingers. But that pales besides the £28 million price tag put on the 40 digits of the superstar classical string quartet Bond.
Brownian motion
Gordon Brown has been much criticised recently by campaigners and in the
press for extending means-tested financial help to nine out of ten parents, half
of all pensioners, all low paid workers, and many unemployed people. So I was
amused to find on my bookshelves The Red Paper for Scotland published in
1975. In his introduction the editor of this collection of essays writes "What
is urgently required merely to meet people’s elemental needs – …a phasing out of
means-tested benefits by adequate provision by right for the old, the single
parent family, the unemployed, the disabled, and the low paid". The title of the
piece? ‘The Socialist Challenge’. The name of the author? Gordon Brown. Now
Chancellor of the Exchequer.
Expensive error
One of Britain’s richest men has found out that being underinsured can be an
expensive mistake. The Duke of Buccleuch has been given a mere £3.2 million for
a stolen painting attributed to Leonardo d Vinci. Experts say the two square
feet of canvas painted by the Italian master could be worth up to £50 million.
The Madonna with the Yarnwinder, painted around 1500, was stolen off the walls
of Drumlanrig Castle on 27 August. The thieves were caught on video tape but the
picture remains missing. The 80 year old Duke of Buccleuch had apparently
skimped on the insurance for his £400 million art collection. Within days of its
theft he was calling for public money to be spent to help landowners afford the
cost of giving the public access to their treasures – it costs just £6 to visit
the castle. A spokesman for the Buccleuch Estates said "There are complex issues
to resolve about the insurance" but the Duke’s grandson, Lord Walter Eskdaill
told the Scotsman newspaper that £3.2 million had been paid within a
month of the theft.
After a theft insurers will check that a householder is fully insured. The average cost of the contents of a home is £42,000. But if you have insured the contents for half of that, £21,000, and you lose something worth £1000, the insurer will normally scale down the payout – giving you half the value, just £500. The implication is that the Duke had his art insured for around £50 million rather than the full value. Or he might have insured the collection on a ‘first loss’ basis, with a maximum payout fixed at the greatest loss foreseeable in normal circumstances. No-one anticipated two tourists would walk off with one of the world’s most valuable works of art.
CHIPs with everything
How’s your memory? Over the next couple of years we are all going to have to remember a four digit Personal Identification Number or PIN to use our credit or debit card to pay for things in shops and restaurants. The card industry is phasing out signing and replacing it with this new, more secure method. Or as they put it ‘PIN not pen’. Over the next year or so every plastic card will be replaced for one that contains a new, smarter computer chip which will store details of our secret four digit Personal Identification Number or PIN. You will be given your first PIN but you can then change it at any cash point for one you can remember more easily – perhaps the month and day of a birthday you will never forget.
The banks say the change will help stamp out fraud – which costs more than £400 million a year. Although individuals do not normally have to pay the cost of fraudulent use of their card, we all pay the bill in higher charges. In France where they have had a similar – but incompatible – system for some years, fraud has been cut by 80 per cent. The banks in the UK cannot say how much they expect fraud to be reduced. But it will be substantial enough to repay the £1 billion cost of changing 120 million cards and 850,000 tills.
From the start of this year, if you have a new card and you shop where the tills have been changed – Safeway is the first national retailer to make the changeover – you will be expected to use the PIN rather than signing. By the end of 2005 the changeover will be complete and signing your name will seem as old fashioned as paying with white fivers.
If you really cannot use the new system – eyesight, memory and dexterity do fade with age – then you can always pay by cheque – no PIN will be required when you use a cheque guarantee card.
February 2004
e-mail Paul Lewis on paul@paullewis.co.uk