If you do not feel comfortable editing files by hand, you can use Dead Island Helper, a program which will fix the FOV issue as well as other advanced settings.
According to the creator, it does install a keyboard hook to detect if Dead Island is running, but only to prevent multiple keystrokes from being processed. It shouldn't trigger VAC, but you have to decide for yourself if you want to run the risk.
If you'd rather edit files yourself, you can follow the steps outlined below:
Navigate to the Data folder in your Dead Island installation. This
will vary based on whether you installed through Steam or put it in
an install folder of your choice. In Steam, by default it is located
Data0.pak file and open it with a file archiving
program such as WinRAR or
Data0.pak you'll see a folder called
Data and inside
Data, you will find the `Skills' folder.
Skills folder, locate the file
Now that you have found this file, navigate to
out folder, you're going to want to recreate the directory structure of where the XML files was located. Do this by creating a New Folder, name it
Data, then inside that folder, create another New Folder and name this one
default_levels.xml folder from the archive into the
Skills folder. You can close your archiving program after this, as you wno't need it anymore.
After pasting the
default_levels.xml file, open it with a text editor such as Notepad.
Locate the variable
CameraDefaultFOV. You can do this by using ctrl+F. You'll see
v+"62.5" as the default value. Change this so something between 70 and 90, based on your preference.
Save the file and exit. You may want to set it as "Read-only" like it's recommended in this question just to be safe.
You should be all set. The way this works is that the game apparently reads the settings that you set in this file before it reads the default files. Because this doesn't involve actually modding any of the game's actual data files, you shouldn't be at risk for VAC to flag you for cheating or something.