Businesses will not invest in personal data protection until there are more tangible consequences such as heavy fines or jail sentences, says security firm Stonewood.
Bank account takeovers have increased 23% in the past year, according to the research by the UK's fraud prevention service, CIFAS.
Unless the government sends a clear message that there are heavy consequences to neglecting to secure data, ID fraud will only escalate, said Chris McIntosh, chief executive of the Stonewood Group.
Acording to research commissioned by Stonewood, 66% of people in the UK are worried that they will be affected by identity loss in the future.
Some 61% said it was unacceptable that by Prime Minister Gordon Brown's admission, the government cannot promise that every single item of information will always be safe.
Most respondents (89%) said they believe that it should be a criminal offence for a government department or private sector business to lose data negligently.
"The Government must ensure that the punishment fits the crime, and that businesses are held accountable," said McIntosh.
This story first appeared in Computer Weekly