Insure against mobile phone rip-offs

Margaret Dibben: Money Matters

Carphone Warehouse has been fined more than £29 million for misselling mobile phone insurance. Whistleblowers had tipped off the Financial Conduct Authority (FCA), which regulates financial products including insurance sold as an add-on by electrical retailers.

Carphone Warehouse had been selling policies called Geek Squad, which combined mobile phone insurance and technical support. The FCA punished the company because it had not taught staff to advise customers properly.

Instead of making sure that the product was suitable for each buyer, staff were trained in ‘spin-selling’ and so recommended Geek Squad, whether or not customers needed it. In fact, many shoppers already had phone cover through their home insurance or bank accounts.

Staff were also instructed in how to overcome customers’ objections to the sales patter when they should have seen these comments as an indication that the customer did not want or need the policy. This is contrary to the FCA conduct of business rules which state that retailers must ensure that customers actually need the product.

Carphone Warehouse accepted the FCA’S findings and the fine was reduced by 30 per cent; otherwise it would have been £41.5 million.

To underline just what big business mobile phone insurance is, in the six and a half years of sales under investigation, Carphone Warehouse sold nearly £445 million worth of these policies. A third of them were cancelled in the first three months – a clear indication that a

product is being missold. But Carphone Warehouse failed to take note and also failed to handle customers’ complaints fairly.

Carphone Warehouse has set up a redress scheme for the 28,000 customers who were missold this policy. If you are one, you can contact the company on www.geeksquad.co.uk/contact/ complaints or phone 0800 049 6190. You can also go back to Carphone Warehouse if you have had a previous complaint about Geek Squad turned down. If you are unhappy with the outcome, you can complain to the Financial Ombudsman Service.

Last October, after Carphone Warehouse’s period of misconduct, a new FCA rule came in saying that when insurance companies sell policies through retailers, the insurer itself must be certain that the shop staff always act in the customers’ best interests and that the product meets the customers’ needs. This now gives consumers extra protection.

The Carphone Warehouse fine is one of the FCA’S highest. It also fined Santander £32.8 million for treating customers unfairly and failing to co-operate, imposed a £76 million fine in the Keydata scandal and fined Deutsche Bank £163 million for financial crime. The huge amounts raised from FCA fines go straight into the Treasury’s coffers.

Mobile phone insurance covers lost, stolen or damaged phones but you need to know the limitations of each policy. Claims might be rejected because, even though you were mugged, no violence was involved. Or the insurer says you left your phone ‘unattended’ when you lost it on a train, or you failed to report it within 24 hours. Be aware that you will probably be compensated with a reconditioned phone rather than a new one.

If a retailer tries to sell you insurance when you buy a new phone, always shop around for policies elsewhere before you decide. There is a wide variation in cover and cost.