Phone Retailer Fined Over Handset Insurance Flaws
The UK phone retailer, CarphoneWarehouse (CPW) has been fined by the UK's Financial Services Authority (FSA) after it was found guilty of miss-selling phone insurance policies. The FSA fined CPW a total of UK£245,000 (US$463,000), and the company says that it wont appeal the fine.
In the period from 14 January 2005 until 24 October 2005, CPW breached several rules in relation to its insurance telesales channels. As a result, CPW failed to send 118,000 customers who had bought mobile phone insurance through its telephone sales channels a Statement of Demands and Needs ('SDN') in a durable format, and the Firm also failed to send 56,000 of those customers a policy summary setting out the main features of the policy.
In the relevant period between January and October 2005, CPW sold approximately 570,000 insurance policies, over 20% of which (approximately 118,000) were sold through the Firm's various telesales channels.
CPW also reportedly breached FSA rules by failing to provide complete and timely information to the FSA regarding the failure to send SDNs to customers. The Firm discovered the SDN omission in March 2005. The Firm notified the FSA of the breach in October 2005.
These matters are viewed as serious by the FSA because they demonstrate a failure on the part of the firm to apply the TCF principle ("Treating Customers Fairly") in a practical and timely manner.
The FSA said that it considers it particularly serious that CPW continued to sell insurance through its telesales channels when it knew that it was not complying with the requirement to provide customers with SDNs. In addition, having initiated the implementation of a new procedure to remedy the SDN defect, the Firm was reckless in proceeding on an assumption that the proposed new procedure had been implemented. The Firm subsequently discovered that its new procedure had not been implemented and again it carried on selling insurance when it knew that it was not complying fully with the requirement to provide information to customers.
The FSA considers that the conduct has been mitigated to some extent in that CPW co-operated with the FSA in agreeing to carry out a retrospective mailing of policy summaries and SDNs to the relevant customers and has committed to an appropriate remedial action plan to investigate and redress any consumer detriment which may have arisen in relation to the affected customers."
Posted to the site on 8th September 2006