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Mobile phone insurance: A mis-selling scandal?

iPhone 4sAs more and more customers complain about rejected claims, are companies selling mobile phone insurance being upfront enough with customers?

Many assume that mobile phone insurance will cover a range of circumstances, such as accidental damage, theft and loss.

But, as many of us have discovered in recent years, that’s not always quite the case.

Indeed, many complain their claims have been rejected due to seemingly spurious restrictions that they were given no indication of when buying their policy.

Case study: The wrong kind of theft

One customer to experience such difficulties was Nick Stapleton from London.

He bought mobile phone insurance through high-street retailer Carphone Warehouse when he purchased his Blackberry smartphone.

But when he had his phone pickpockted, his claim was rejected because he “hadn’t seen” the crime take place – a policy restriction he says he was not told about when taking out the cover

He said: “When you are sold an insurance policy that covers theft, you do not expect that pickpocketing is considered to be outside of that.

“My insurance company basically told me that if I hadn’t been violently robbed they wouldn’t be paying out.”

Furthermore, there’s no mention of any such restriction on the website of the Carphone Warehouse’s insurance partner, the Geek Squad.

It certainly isn’t mentioned in the terms and conditions of the account. So we asked Carphone Warehouse and the Geek Squad for a response.

Their statement reads: “Our insurance policies are written in full consultation with our insurance underwriters Aviva and provide comprehensive cover for a range of scenarios which are clearly detailed for customers in their policy wording."

The statement adds: “Based on the initial information provided by Mr Stapleton, we did not feel that the customer was able to claim on the policy”.

This was despite the fact that he provided a crime reference number immediately upon making the claim, something that the firm said was not alone enough to ensure a payout.

After a lengthy appeal, the companies finally agreed to pay out, citing the fact that they had received “additional information” and spoken to the “relevant police authority”.

Interestingly, Mr Stapleton says that the only additional information he offered was that he would be taking the case to the press.

Mis-selling appears to be rife

What’s worrying about this case is that Mr Stapleton says he was given no indication that the cover he was buying would not protect him in the event of ‘unseen’ theft.

He also claims he wasn’t even given any policy documentation at the time of purchase.

Indeed, he says had he realised this exclusion at the time of purchase it's unlikely he would ever have bought the policy.

This is far from the only case of suggested mis-selling of this sort of insurance – a quick web search brings up scores of complaints on message boards of similar treatment.

What’s the best way to protect your mobile?

Many argue that buying additional mobile phone cover is pointless because this sort of thing is often covered by a standard home contents insurance policy.

But while it’s true that many contents policies will cover mobile phones at no extra cost, there are some things you might want to consider before rejecting the idea of buying standalone insurance.

Firstly, making a claim on your home insurance is likely to be a lot more expensive.

Online insurance firm Protect Your Bubble, for example, charges £50 excess for iPhone claims and £25 for any other phone – far less than the typical £250 fee for claiming on your home insurance.

There is also the prospect of losing the no-claims bonus on your home insurance.

Packaged accounts

Banks have recently come in for some criticism from the Financial Services Authority (FSA) over their selling of packaged current accounts.

These accounts have a monthly charge for added benefits, such as travel insurance, breakdown cover and mobile phone insurance.

According to our research, there are currently 52 bank accounts offering mobile phone insurance at present. Of those, three exclude iPhones from their cover.

And not all packaged accounts will cover things like data usage and unauthorised calls in the event of theft. The same goes for home insurance policies.

Shop around

The most important thing to do is think carefully before buying a policy in store when buying or upgrading your mobile phone.

Shop around for the best standalone policies and compare the cost, excess and levels of cover against your home insurance and any packaged accounts you have.

Read the small print and ask about anything you’re unsure of before you sign on the dotted line.

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Stephen Jones

Stephen Jones

Stephen Jones was a reporter for Confused.com between 2009 and 2010, writing personal finance news and blogs. He has since moved on to MSN Money but continues to write for Confused.com.

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