A major provider of identity theft insurance has suspended sales due to an investigation by the City watchdog.

CPP has ceased all new sales of its ID product although it hopes to start selling a new version within six weeks (see the ID Fraud Protection guide).

It plans to redesign the product so it no longer includes insurance.

The group adds it may conduct a review of past sales to see if any customers are due compensation. It is believed to have 1 million UK customers.

The Financial Services Authority (FSA) is investigating "certain issues" in relation to CPP's sale of identity theft protection, including failings during sales calls with customers.

You're rarely liable for fraudulent transactions on a credit or debit card, providing you can prove it wasn't you, which is why ID fraud policies are often not worth it.

Which? chief executive Peter Vicary-Smith says: "ID theft insurance is a product most people will never use yet hundreds of thousands of policies have been sold, which raises serious questions about the practices employed.

"We wrote to the FSA last year asking it to investigate ID theft insurance sales after several of our members contacted us with concerns, so it's good to see action taken."

How do I prevent ID theft for free?

Our top five tips to keep the fraudsters at bay are:

  • Keep your Pin safe and never give it out to anyone.
  • Get a shredder to destroy important documents so someone rooting through your bin can't find personal data easily.
  • Keep your computer up-to-date with free anti-virus software (see the Free Anti-Virus Software guide).
  • Always check bank and credit card statements and notify your provider of anything that looks dodgy.
  • Check your credit reference file at least once a year (see the Credit Rating guide).

Additional reporting by Helen Knapman.

Further reading

Stay safe: ID Fraud Protection, Free Anti-Virus Software, Credit Rating