Carphone Warehouse fined £29m for mis-selling mobile insurance

Customers were offered Geek Squad coverage when it was not necessarily a useful product for them amidst a culture of "spin selling".

The FCA investigated Carphone Warehouse's approach to selling Geek Squad cover to customers between December 2008 and July 2015.

They found that a high proportion of policies were cancelled early, an indicator of potential mis-selling by a company.

Customers who believe they may still be owed a refund are urged to contact the company directly by phone, post or online.

Trained to sell

The FCA learned that Carphone Warehouse staff were trained to focus on selling Geek Squad coverage to customers without checking if they needed the product.

Staff were taught "objection handling", designed to help them overcome the objections put forward by customers about why purchasing the cover was unnecessary for them.

In addition, if customers said they thought they had similar cover already or were unsure about purchasing, they were encouraged to buy the product on the spot and cancel within 14 days if necessary.

This led to the tangible risk that customers would not cancel in time and might still be confused about whether Geek Squad cover was relevant to them.

Furthermore, when complaints about this selling process were made to Carphone Warehouse, the company failed to properly investigate or consider the complaints.

Valid complaints were not upheld and therefore no accurate record of mis-selling was assembled by management prior to the whistleblower's report.

Carphone Warehouse did not dispute the findings and qualified for a 30% discount on the original fine of £41m for their immediate acceptance of responsibility.

Mis-selling back in spotlight

Carphone Warehouse made sales of Geek Squad products worth over £444m in the seven-year period investigated by the FCA, although there is no confirmation how many incidents of mis-selling there were.

The company has run its own redress schemes, meaning that many who were eligible for refunds have received them already.

Plus, for customers who cancelled their policies after just a couple of months, the refunds might be worth comparatively little, and customers might elect to simply move on.

The problem of mis-selling, however, has been brought back into the public eye by this case, and it brings to mind the furore over PPI (payment protection insurance).

While PPI mis-selling was spread across several banks, the Geek Squad mis-selling bears the hallmarks of the pervasive culture of selling that afflicted the PPI industry.

New rules were implemented in October 2018 forcing insurance firms who used retailers to sell their insurance products to check that retailers were complying with standards such as acting in the customer's best interests.

This may reduce the number of mis-selling cases in retail, yet other sectors are still vulnerable to mis-selling issues, with recent figures showing mis-sold pension compensation of over £40m in 2018 alone.

Pressure to buy

Customers feeling pressured into purchasing something they don't need or understand is nothing new but cracking down on it has been a cornerstone of the FCA's strategy over the past few years.

Along with insurance and pensions, solar panels and fraud protection teams have also been subject to scrutiny.

Choose would suggest customers check their current insurance coverage before signing up to any extra packages. Along with this, if you ever feel pressured into buying financial products, exercise your right to complain.