Staff at insurers and lenders may face up to two years in jail if they use unscrupulous practices to gain information on clients.
The Government is proposing to amend section 60 of the Data Protection Act to increase penalties for deliberate and wilful misuse of personal data following a lengthy consultation.
The Information Commissioner’s Office claimed last August it had evidence that insurers use private detectives and other unscrupulous means to source information on clients they believe could be making fraudulent claims.
Some lenders have been accused of using similar practices to trace debtors.
ABI spokesman Jon French says: “The number of cases where insurers could fall foul of this ruling is pretty low but we expect insurers that sub-contract work, sometimes with private investigators, to uphold high standards.”
Constitutional Affairs Secretary Lord Falconer says: “We are determined to stamp out this intrusive and illegal trade.”