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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.