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Have you felt pressured to add insurance to a purchase?

A man watching a blank or static screen of his television.

You know the drill. You book a holiday and the travel agent tries to tag on travel insurance. Or you’re offered a great deal on an extended warranty for your new washing machine. But are these add-on products worth it?

It’s been a busy week in the news for add-on financial products. The Financial Conduct Authority (FCA) has launched a market study this week into whether these products really represent good value for money.

In the meantime, the Office of Fair Trading has launched its new comparison site for extended warranties, helping potential buyers to shop around.

Putting on the pressure

I’ve had to endure the all-too-familiar extended warranty pitch this week as I tried to buy a new TV from Currys. Credit card in hand I was ready to pay and escape, but the salesman had other ideas. It seems he was determined to sell me a ‘Whatever Happens’ care plan on my new telly.

When I told him that my home insurance policy covers me for accidental damage, he said my insurer would only cover a repair and not a replacement, even though he didn’t know who I’m insured with. I said no.

Trying a different tack, he said that I’d be covered under the warranty if the TV turned out to be faulty. I had to explain to him that I’m already covered by law under the Sale of Goods Act. I certainly don’t believe this is the sort of advice a major retailer should be giving out.

FCA should investigate sales practices

Personally, I think extended warranties are often a waste of money, but they’re clearly a money-spinner for retailers. It’s the financial services equivalent of ‘Would you like fries with that?’ Retailers turn on the hard sell in the hope that you’ll say yes in the heat of the moment.

Even if I had been interested in the warranty for my TV, there was no way I would have had time to read the full terms and conditions before signing up in-store. And when the FCA asked consumers to look at their add-on policies, many of them were surprised to find they weren’t as well covered as they’d thought.

And this brings me back to the FCA’s investigation into the wider add-on insurance market. My experience in Currys leaves me in two minds about it. It’s good news that the FCA will look at the products’ design and value for money. However, it’s disappointing that it won’t look at the way these products are sold.

Has a retailer tried to sell you an add-on insurance product when you’ve tried to buy a laptop, holiday, car or TV? Were you tempted by the offer?

Comments
Member

If you’d bought your TV at John Lewis you’d have got a 5 year warranty included for free. But, apparently, in a comparison site (I think it may be FCA) that looks at value-for-money warranties, it doesn’t feature because it is not charged for! How cazy is that logic.
I think all independent reports, including Which, regard extended warranties as generally not financially worthwhile – you are better off without them and paying for a repair if the need arises. Every appliance I have bought recently (online) was followed up with a form from Domestic and General (if I remember correctly) urging me to buy a 2 or 3 year extended warranty. No thanks.
However, exceptionally when I bought a Miele dishwasher last year they offered a 10 year warranty (i.e. 8 additional years) tp repair or replace for £140 if any fault occurred, labour and parts. I decided that was a good enough deal, even for a reliable brand, as we use it every day.

Member

The only warranty we bought was for a 29″ crt TV that was one of the best on the market when we got it.

When it could not be repaired, Domestic & General gave us about £30 comparing it to the few bottom of the range crts that were still on the market, as flat screens were then the new thing. They would not budge when I tried to argue our case.

Buying one for the washing machine on the other hand would have been worth it as it cost about £200 to repair a couple of months after the initial warranty ran out, but our experience with the TV stopped us buying any more warranties.

All-in-all the money is better saved for repairs or a next purchase.

Member

I avoid taking out extended warranties and I cannot recall having regretted this. Problems usually occur fairly soon after purchase, in my experience. I would rather take the small risk of having to replace a faulty item than pay for numerous extended warranties.

I did take out ‘gap insurance’ on a new car a year ago. While the salesman was away checking with his boss that he could give me a ‘heavily discounted price’ (or pretending to do this), I looked up online prices for comparison. Unless I have an accident in the next couple of weeks this insurance will have been a waste of money.

I do look around for ‘free’ extended warranties provided provided by manufacturers or retailers. It is high time that we push for these and the length of the warranty was included as a factor in the Which? ratings for products and selection of Best Buys. If retailers/manufacturers are responsible for the costs of repair/replacement for a longer period, they would sell us better quality products.

Member

We have discussed longer guarantee periods before as very desirable. We should expect reassurance from manufacturers that their products are sufficiently durable – it has happened with cars but not spread much wider. I believe many manufacturer’s products are durable and well-designed but with repair costs so expensive those occasions where a fault occurs should be covered for a decent amount of time. Poorer quality manufacturers would then face pressure.

However, we overlook the use of the Sale of Goods Act, which expects products to operate for a reasonable time. What we need is for this to be more widely used, but to do that we need guidance on what reasonable operating times without failure should be for different products, and how to use the Act. This perhaps is where Which could be providing information and taking a guiding role. Can you do this Which?

Member

Malcolm

Products are often well-designed but even the large manufacturers save a few pennies by using barely adequate electronic components, flimsy plastics, etc. Many small domestic products are designed for easy assembly and very difficult to take apart to repair them, contributing to prohibitive repair costs. For these and other reasons, TVs, washing machines and other larger appliances have well-known weaknesses or design faults. Perhaps best known are the problems associated with different models of cars, which are listed on the Honest John website and elsewhere. In the world of consumer electronics, it is well documented that certain Sony TVs suffer damage to their screen due to overheating.

The Sale of Goods Act should be the answer but it requires the customer to provide evidence that the fault existed at the time of purchase. I don’t know a single person who has even attempted to obtain this sort of report. Mentioning that you are aware of the Act is certainly worthwhile. A friend was going to write off a 14 month old TomTom sat nav last week, but I encouraged him to write to Amazon, explain the fact that it has been troublesome and mention his rights. They replied promptly saying that the model has been discontinued and gave him a full refund. Car manufacturers and dealers have led the way in ‘goodwill’ payments and free or discounted repairs. I once got a ‘free’ replacement engine (labour was charged) for a car that was two years out of the guarantee period.

Many people who use this site will be perfectly capable of politely explaining problems, pointing out their legal rights, and explaining what redress they are seeking, either with or without the help of the template letters on the Which? website. I’m keen on manufacturers’ or retailers’ free extended warranties to help the many consumers who would struggle to do this.

With extended warranties, it is essential that the manufacturer and retailer have appropriate protection too. It’s not reasonable to expect a washing machine to last ten years in a household with half a dozen kids. It is not difficult or expensive for the manufacturer to record the operating hours of a washing machine, etc. Car guarantees have covered a certain number of years or miles (whichever comes first) for a long time. There is a lot we can learn from the motor industry.

Member

wavechange, the part of SOGA that I am interested in is durability (try Kindles as an example). This means that a product should last a reasonable length of time, not necessarily with a specific fault from purchase. I suggest this could be looked at, as products may fail before we might reasonably expect, and we should be able to claim some redress (e.g. repair, contribution to replace, replacement part depending on length of time used). It is an area that seems little used but could be of real value if a concerted effort were made to make use of it. Hence a potential task for Consumers Association – not about template letters but about what “reasonable durability” of different products might be.

I have relevant extracts from the OFT explanation of SOGA as follows:

Customers’ rights last for six years:
The law says that a customer can approach you with a
claim about an item they purchased from you for up to six years
from the date of sale (five years after discovery of the problem
in Scotland).
This does not mean that everything you sell has to last six
years from the date of purchase! It is the time limit for the
customer to make a claim about an item. During this period,
you are legally required to deal with a customer who claims
that their item does not conform to contract (is faulty) and
you must decide what would be the reasonable amount of
time to expect the goods to last. A customer cannot hold you
responsible for fair wear and tear.
The six year period is not the same as a guarantee, but it does
mean that even where the guarantee or warranty supplied
with the product has ended, your customer may still have
legal rights.

• be of satisfactory quality:
quality of goods includes
– appearance and finish
– freedom from minor defects (such as marks or holes)
– safe to use
– in good working order
– durability

durability:
the durability requirement is that the item should
work or last for a reasonable time but it does not have to
remain of satisfactory quality. For example, a pair of wellington
boots should stay waterproof but does not have to keep its
brand new appearance.
reasonable time – this depends on the item and the
circumstances. What is reasonable is determined by taking
everything into account and considering what an impartial
person would think is reasonable.

Member

Durability is my main concern too, Malcolm. I also feel that it is too difficult for the average consumer to pursue their rights under the SOGA. If the case went to court, the customer would probably be asked for a professional report indicating that the fault was present at the time of manufacture. If a washing machine fails prematurely because the manufacturer has used an underspecified component (e.g. a transistor costing 20p rather than 50p), the cost of parts (a new circuit board would be fitted) and labour could be over £100. That fault was not present at the time of manufacture.

Deciding what constitutes satisfactory durability is not easy for some items. For example, single person might use a washing machine twice a week but a family could use their machine twice a day.

Whatever system is put in place to address this problem, it needs to be easy to understand and use, and fair to both the customer, retailer and manufacturer.

Member

The fault does not have to be present at purchase. You buy a washing machine, and it fails in an expensive way after 18 months – do you give up and not try for redress? Your TV fails after 2 years – is that reasonable? Your boiler stops working a couple of years out of warranty – should you expect that? No – these items are not reasonably durable and consumers should expect some compensation – repair for example. It may be down to poor quality components, and unless it was a cheap and nasty item they probably form a design defect, or an out-of-spec component.

It may not always be easy easy to pursue such claims, but avoiding them is no way to move forward. An association of consumers can help individuals by, for example, forming what reasonable durability might mean, by being in a position to accumulate faults that can help consumers frame their argument, by testing appliances and uncovering potential shortcomings. Which? for example?

SOGA does seem fair to both consumers and retailers in its framework. It needs implementing reasonably. Many retailers and manufacturers will take a sensible approach to durability, I believe, if approached appropriately. Legal action should not normally be necessary – it only lines the lawers pockets.

Member
Em says:
11 July 2013

The problem with durability measured in years alone is that it takes no account of the usage to which an appliance is put – and hence manufacturers are not inclined to be very generous.

We are quite used to car warranties being expressed in years and mileage – e.g. 3 years or 50,000 miles. It can’t be beyond the wit of electronics engineers to design cheap, tamper-proof, sensors that measure the number of times a dishwasher has been used, or the operating hours of a lawn mower, so that warranties could take usage into account. I’ve got chips in my ink-jet cartridges that tell me when to change them and prevent refilling.

So why can’t I have a chip in my vacuum cleaner or kettle that offers a true “lifetime” guarantee?

Member

Where have I suggested we should not seek redress in the event of a problem? I have been complaining about lack of durability since 1971, when I tackled Rumbelows over my faulty Grundig reel-to-reel tape recorder. Eventually I fixed the problem myself, but this incident sparked my interest in consumer rights. I have had a great deal of success over the years and if anyone is unhelpful after a polite request, I produce information about the SOGA.

As I said, you may need an expert’s report for older goods. Which? has this information on their website:

“Expert’s reports
Beyond six months, it’s up to you to prove that the problem was there when you received the goods even if it has taken until now to come to light.
So, you may need to prove that the fault was not down to ordinary wear and tear or damage you caused, and that the product (or a component) should have lasted longer than it did.
To do this you may need an expert’s report, for example, from an engineer or a mechanic.”

I certainly do not want to take legal action and would like a system that makes it easy to seek redress, irrespective of confidence and detailed understanding of consumer rights.

Member

Em, exactly – elapsed time meters are cheap and could help. Other methods are probably available for manufacturers to decide fair usage. However I would think with many items it would not be difficult.
wavechange – as I read it durability does not imply there was a problem at purchase (a defect) as I restated above. It is this area that could do with exploitation. Collating information on product faults would be a good way of demonstrating sub-standard designs for example, and give consumers a basis to proceed. It has taken a long time for car manufacturers to be forced to recognise that a one year warranty is inadequate. How long will it take to persuade other manufacturers the benfits of backing the durability of their products. You’ve tried for 43 years. Perhaps Which could address the issue with other Consumer Associations for the benefit of we consumers?

Member

Em

Most domestic equipment contains electronic circuitry, making it easy to log the total operating time or number of times an item is used. Non-electronic elapsed time indicators have been in use for at least 40 years, though I have never seen them in domestic equipment.

Member

This is not only about products that contain electronics of course.

Member

The early indicators looked like a wire-ended fuse and contained a small amount of mercury. That’s probably why they have been withdrawn. A cheap electronic device will do the job.

Member

OK – point taken Malcolm. There are many non-electrical items too. 🙂

It’s difficult to judge what constitutes fair wear and tear on carpets, for example.

Member

To take this further, I would like to promote the practice of using commonly reported problems to provide evidence of lack of durability.

There are many reports about screen failure on Kindles, overheating of screens on some models of Sony TVs and I recall some overheating problem affecting early PS3 games consoles. Anyone capable of searching the Internet can easily turn up multiple reports of the same problem.

I very much agree that we need the input of Which? to take this forward.

Member

Here is a colourful guide to the Sale of Goods Act, produced by the Office of Fair Trading.

Maybe we should get back to the topic of purchasing insurance. 🙂

Member

Whilst this conversation is about extended warranties,which we generally agree are not worthwhile, I think it important to remember that a (time limited) warranty is only part of your rights, not all of them. My interest is in both extending time limits on warranties, at the very least for better-quality products, and also to use the provisions in the sale of goods act when a product proves to lack acceptable durability. Many reputable retailers and manufacturers will deal with such issues sympathetically, because they have few problems of that nature and they would wish to deal fairly with a genuine problem to safeguard their reputation.
We bought a decent set of oak dining chairs many years ago. After 4 or 5 years one came apart and inspecting the rest, around half showed joints (mortice and tenon, so decent construction)beginning to fail. M view was they had been inadequately glued and, because they had not had a great deal of use, felt they were defective. I spoke to John Lewis, who had originally supplied them, not as a complaint but to report the problem to them. They promptly sent their furniture expert along who said they were poorly glued and that he would take them away in two batches and repair them. In fact he dismantled them and reglued them completely. That is now 10 years ago, and no problems since. I was reasonable in my approach, JLP were helpful in theirs, there was a durability problem that was resolved. I am still their customer – no surprise.

Member

The Financial Conduct Authority (FCA) has fined the Swinton Group Limited £7.4 million for mis-selling monthly add-on insurance policies.

The FCA found that Swinton’s aggressive sales strategy meant that it failed to treat customers fairly in its telephone sales of monthly add-on insurance policies which were sold alongside its car insurance and home insurance products.

Which? executive director, Richard Lloyd, said: ‘It’s good to see the FCA handing out a hefty fine, which sends a very clear message to the insurance industry that mis-selling won’t be tolerated.

‘As part of its review of the insurance industry the FCA should scrutinise how sales incentives are offered to staff in-store and how online marketing and product information is presented to customers.’

http://www.which.co.uk/news/2013/07/swinton-fined-for-mis-selling-insurance-add-ons-326585/

Member

Some good news for you:

FCA proposes shake-up of insurance add-on market

Firms that sell general insurance add-ons will be required to highlight poor value products to consumers under new proposals announced today by the Financial Conduct Authority (FCA).

http://www.which.co.uk/news/2014/03/fca-proposes-shake-up-of-insurance-add-on-market-359018/

Member
Morgan says:
22 September 2014

My dishwasher has been insured with Domestic & General since I bought it. We have had three visits to repair it, paid for by the insurance. Now, at renewal time, D&G have decided to increase the premium by 25%. When asked why, their reply was:
‘In order to maintain those standards, we continually monitor a number of factors that influence our prices. We always try and keep the effect of such price rises to a minimum, but occasionally we need to respond swiftly to changing circumstances and this can sometimes result in bigger jumps than we initially planned.’
A feeble excuse. What does ‘changing circumstances’ mean? Are they allowed by law to make such an increase?

Member

The insurance company is in business to make a profit, like any company. It is possible that the rise in premium may be related to the fact that you have made several claims, but not necessarily. All you can do is shop around for alternative cover or take the risk of your dishwasher not developing further faults. I don’t believe D&G are doing anything illegal, unless you were promised that the cost of cover would be maintained at the same level. You are not obliged to continue the insurance.

What we should all be looking for is appliances with a decent manufacturer’s warranty included in the price. I believe that manufacturers should cover expensive appliances such as dishwashers for ten years (maybe five for cheap ones), provided that they have not been abused or simply worn out through heavy use. If the manufacturer has to pay for the cost of repair, they will be more likely to use decent quality parts in their products.

Member

………..then there would need to be a change in G & S Act legislation to ensure the manufacturer and not the retailer is responsible should any faults occur on larger appliances in particular. Better quality parts would certainly reduce the likelihood of this happening but there is always going to be the odd occasion when faults do occur when the manufacturer should then be held to account, especially when an inherent fault is evident. Paying more for better quality products must include manufacturers insurance [guarantee] so there would be no further need for add-ons but this would affect sales and ultimately profits which is one reason why they churn out cheap inferior stuff with little or no guarantee and expect the consumer to pay when things go wrong through add-ons and unreasonable demands from Insurance Companies.

On the other side of the coin, the service side of any manufacturing industry is a drain on company profits so you would think it would be in their own interests to produce a more durable product. Question is, can the average consumer afford or is willing to pay for them?

Member

Morgan, perhaps the best option for people extending the warranty on their appliances is to take a term insurance where it is available, paid up front, if they look good value. Miele offer 5 and 10 year repair or replace warranties on a number of their appliances. I took an 10 years on a dishwasher for £149. Not something I would normally do but it seemed reasonable value for 10 years total peace of mind.

We have discussed long manufacturers’ guarantees and the alternatives elsewhere. All will add to the initial cost of the appliance because there will be failures that need funding. It should encourage manufacturers to design with reliability and durability in mind, as this would minimise claims. But do we want to pay more for appliances? There seem to be mixed views.

Incidentally, has the cost of your insurance so far been less than the cost of repairs to your dishwasher?

Member

Once again, I would like to ask Which? to tell us about the length of manufacturers’ warranties for products they test. I believe that warranty length should be a factor in both product ratings and selection of Best Buys. Which? did a great job of letting us know that purchased extended warranties were poor value for money in the 80s or early 90s, so I don’t understand why we are not being encouraged to buy products with better manufacturers’ warranties.

It is also well worth letting us know about retailers that offer extended warranties at no extra cost.

Member

I’d like to know what is a reasonable time for a computer between £1000 and £3000 to last

Lots of manufacturers charge hundreds for extending their warranty by one and two years, and you’ll hardly find one with four and five year warranties.

And what if a component has a longer warranty if you buy it from a shop instead of built into a new computer? The new Samsung SSDs have a 10 year warranty, but will I get that if I buy a new computer with one built in?