/ Money, Technology

Why pay for mobile phone insurance if they won’t pay out?

Photo credit to stuballscramble on Flickr

The financial watchdog has demonstrated that it’s finally getting tough on mobile phone insurers, as it has issued a £2.8m fine as a result of poor complaints handling on mobile insurance policies.

The Financial Conduct Authority (FCA) has fined the insurance company Policy Administration Services, which is responsible for Phone 4u’s mobile phone insurance policies.

In its investigation, the FCA found that Policy Administration Services (PAS) hadn’t been treating customers fairly when they complained they had been mis-sold mobile phone insurance. PAS were found to have regularly rejected customers’ complaints of mis-selling simply because the customer had signed a direct debit form, even though that didn’t indicate a valid sale by itself.

In addition, PAS hadn’t been recording complaints properly, leading it to record lower levels of complaints than it should have.

Mobile insurance failing customers

In response to the £2.8m fine, PAS agreed to look into the cases of affected customers and pay compensation to those left out of pocket due to its failings. It has now reviewed more than 7,099 complaints and compensated 1,438 customers.

This substantial fine comes just one week after the FCA produced its report criticising the wider mobile phone insurance industry. In the report, it warned that insurers must make changes to their confusing small print as it found that, in some cases, it was almost impossible for customers to claim.

The FCA launched the report as it received 615 new complaints about mobile phone insurance in 2012/13 alone. Clear problems with mobile phone insurance were highlighted, as it found in favour of the the customer in 71% of cases.

Playing the claim game

We’ve heard of many stories where legitimate claims are turned down for spurious reasons by mobile insurers thanks to technicalities hidden in the small print of their contracts. It’s something we’ve long been critical of, so we’re glad to see the FCA stepping up its action against companies who are failing their customers.

However, if the regulator wants to provide a real deterrent to insurers, it needs to start issuing large fines and action must be taken against individuals found breaking the rules.

If you’ve complained about your mobile insurance but don’t believe your complaint was handled correctly, we advise you to resubmit your complaint. If you still aren’t happy with the response, take your complaint the Financial Ombudsman Service.

We’ll be keeping our eyes open for examples of poor sales practice and of claims being turned down. Have you ever had a mobile phone insurance claim rejected?

YSS says:
8 July 2013

Disgusting behaviour and I’m so glad they got fined. .

People are better off investing in a good security app and getting one of the waterproof phones such as the Xperia Z, rather than invest in mobile phone insurance.

At least you’ve a good chance of recovering your phone if it is lost, stolen or falls down the loo.

Bob Blair says:
28 September 2013

My experience of insurance companies is that they will try to avoid paying out by making claiming really difficult, especially if you simply lose an item.

I’ve signed up with WhosMyOwner.com who attempt to get to get lost items back to you. Seems like a really worthwhile scheme.

MC says:
3 March 2015

Hi — I have recently made a claim to HSBC Insurance Aspects about my mobile phone being accidentally damaged. All this is covered by the insurance as per T&C. My mobile phone only ha a sentimental value to me and I wasn’t interested with a repair or replacement and agreed for a cash settlement. However the insurer only pays back the value of the value of the phone within the current market, which is 3 times less than the amount I have paid when I first bought it (4 years ago). There is nothing specific in their T&C supporting their judgement on cash settlements.

I would really appreciate some advice on this please.

Many thanks.