Geek squad insurance
In March 2019, the UK’s Financial Conduct Authority (FCA) fined Carphone Warehouse for failings related to the mis-selling of ‘Geek Squad insurance’, a mobile phone insurance policy and technical support service that was sold alongside electronic products. The FCA found that Carphone Warehouse Staff were not sufficiently trained to identify consumer needs, and were encouraged to use aggressive sales techniques to encourage consumers to buy the product.
Staff were trained to recommend Geek Squad insurance to consumers who already had equivalent cover. Staff were also trained to overcome customer objections. As an example, if a customer said they may already have a cover, they were told to buy Geek Squad anyway and cancel within 14 days – with customers then responsible for cancelling on time to avoid payments. As a result, thousands of consumers were persuaded to buy Geek Squad insurance even though they may have already held equivalent cover through other insurance policies.
From 2008 to 2015, Carphone Warehouse made regulated sales of Geek Squad policies worth over £444.7 million. A high proportion of these policies were subsequently cancelled early. For example, in January 2014, 35% of policies were cancelled within the first 3 months from inception. High cancellation rates are an indicator of a risk of mis-selling, which Carphone Warehouse failed to properly consider according to the FCA. Carphone Warehouse set up a redress scheme, with £2.3m to compensate affected consumers. The FCA fined Carphone Warehouse £21m.