Whistleblowers help uncover Geek Squad insurance mis-selling scandal

The Carphone Warehouse has been fined over £29 million for the mis-selling of millions of pounds of insurance products.

The Financial Conduct Authority (FCA), handing down the fine, said the investigation into the technology retailer stemmed from whistleblowing reports.

According to the report, The Carphone Warehouse has been fined £29,107,600 for “failings that led to the mis-selling of ‘Geek Squad’” – a mobile phone insurance and technical support product.

The investigation found that between December 2008 and June 2015, the retailer made sales of Geek Squad policies worth in excess of £444.7 million. However, a high number of these policies – around 35 per cent in the first three months – were cancelled early.

The FCA said high cancellation rates are often an indicator of mis-selling which The Carphone Warehouse failed to consider.

Upon closer inspection, it was found that the retailer had “failed to give its sales consultants the right training” to give informed advice to customers purchasing insurance products, while staff were “not trained adequately” to assess whether an insurance product was suitable.

For example, the investigation uncovered multiple instances where Geek Squad products had been sold to customers who already had cover through their home insurance or bank account.

Moreover, it emerged that staff had been trained in “objection handling” – where staff would attempt to overcome customer objections rather than properly assessing whether the product was suitable for the client.

On a number of occasions, it was also found that the retailer’s customer support team had failed to investigate and fairly consider complaints concerning Geek Squad products.

Finding The Carphone Warehouse in breach of Principle 3, Principle 6 and Principle 9 of the FCA’s Principles for Businesses, Mark Steward, executive director of Enforcement and Market Oversight at the FCA, said: “The Carphone Warehouse and its staff persuaded customers to purchase the Geek Squad product which in some cases had little to no value because the customer already had insurance cover. The high-level of cancellations should have been a clear indicator to the management of mis-selling.

“Without whistleblowers coming forward these practices may never have come to light. In the past few years, whistleblowers have contributed critical intelligence to the enforcement actions we have taken against firms and individuals.”

Julian Cox, a director with iLaw who specialises in employment law and confidential workplace investigations said: “The FCA were able to identify mis-selling thanks to the actions of a number of employees who were able to identify multiple instances of wrongdoing. Their disclosures as whistleblowers were quite rightly deemed to be in the public interest and resulted in the uncovering of significant financial mis-selling practices.

“The case highlights the importance of being fully conversant with whistleblower legislation under The Public Interest Disclosure Act 1998 (PIDA). Having in place a whistleblowing policy encourages effective internal whistleblowing, meaning that directors have the opportunity to put their house in order and take prompt action to eradicate wrongdoing.”

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