The great iPhone insurance swindle
A few days ago, I wrote about my purchase of the latest consumer gadget – the Apple iPhone.
Unlike many others, I didn’t queue and the transaction was smooth but I was concerned that I was mis-sold insurance for the device. The conversation went something like this (I didn’t record the exact words at the time – but I wish I had):
O2 sales representative – let’s call her Emma (because, according to my sales receipt, that was her name): “Would you like any insurance for your iPhone? It’s only £7.50 a month and covers you for theft, accidental loss or damage not covered by the warranty but it’s only available at the time of purchase – not afterwards – so you would need to take it out now.”
Me: “No thanks – I know I’d be committed to the contract but even so that that’s a lot of money over 18 months. I’ll take the risk of another £269 to replace the iPhone.”
Emma: “Are you sure, because it wouldn’t be £269 – it’s more like £600 for a new iPhone from O2?”
Me: “How can that be – the handset isn’t subsidised, so I should only need to pay for a new handset at the normal retail price?”
Emma: “We don’t make the rules… that’s Apple.”
I subsequently agreed to buy the insurance, after checking that I could cancel at any time.
Yesterday, I asked about insurance in a Carphone Warehouse store and was given a similar response. I also asked in an Apple Store and was told that they thought it was just the cost of a new iPhone but that I’d need to check with O2.
Hmm… I smell a rat here. Especially when the O2 website says that:
“[…]insurance must be purchased within 28 days of activating your iPhone account with O2.”
So, not at the time of purchase then.
If got even worse when I read a PC Pro article about iPhone first impressions, from which I quote:
[in respect of] “O2 pushing £7.50/month insurance, to cover the situation that in the case of a lost iPhone, O2 will require the unlucky punter to buy a new phone and undertake a second contract”
We checked with O2 this morning and, unbelievably, this is true. If you lose your iPhone without insurance, then you will have to splash out on a new handset, and take out a new contract, paying two monthly tariffs at once. Now that is a costly mistake.
O2 has changed tack this morning, and is now claiming that customers won’t have to pay for two contracts at once, but they will have to source an iPhone on their own.
Now, the exact wording in the terms of service (under “Ending the agreement”) is:
“8.3 If this Agreement is ended during the Minimum Period, you may be required to pay us the monthly subscription charges up to the end of that Minimum Period. This does not apply if you end the Agreement for the reasons in paragraph 8.4 or if you purchase a new iPhone from us, but in this case you agree that a new Minimum Period will apply.
8.4 You may end this Agreement by giving us written notice if:
(a) we break this Agreement in any material way and we do not correct the situation within 7 days of receipt of your written request;
(b) we go into liquidation or a Receiver is appointed over our assets; or
(c) we increase charges for calls, messages or data that form part of your inclusive allowance or your Line Rental Charges, or change this Agreement to your significant disadvantage, in accordance with paragraph 9.2 of the General Terms, provided you give us a minimum of 30 days’ written notice (and provided you notify us within one month of our telling you about the changes). This does not apply where the increase or change relates solely to Additional Services in which case you may cancel, or stop using, that Additional Service.”
[Emphasis added by the author for clarity]
I’m no lawyer (so please don’t interpret anything written here as legal advice) but that sounds like I can just buy a new iPhone (from O2) and connect it to the account whereby a new 18 month contract will start but, crucially, there is no mention of the price of the replacement.
After spending much of the day responding on the Apple discussion forums (and not having received a response to my online query via the O2 website), I called O2’s customer service department on 08705860860. After a 20 minute discussion, I got confirmation that:
- A replacement handset would be available at the current recommended retail price of the iPhone.
- The original contract would be ended if a new iPhone was purchased; however a new 18 month contract period would commence.
The exact text of the response I received from O2 was:
As per our discussion today. If you were to purchase a replacement handset you would pay the Recommended Retail Price for the replacement (as of the 13/11/07 it is £269, this price is subject to change). However, please be assure that you will only have to pay the same price as any new customer and would not be required to pay a premium due to the lose [sic].
The only concession you would need to make is that your contract would have to start again from the time of purchasing the replacement please see terms and conditions (relevant section follows).
“8.3 If this Agreement is ended during the Minimum Period, you may be required to pay us the monthly subscription charges up to the end of that Minimum Period. This does not apply if you end the Agreement for the reasons in paragraph 8.4 or if you purchase a new iPhone from us, but in this case you agree that a new Minimum Period will apply.”
Kind regards and enjoy your I-phone [sic],
[Name removed to protect the O2 employee’s privacy]
O2 Customer Service.”
That sounds perfectly fair to me, so why are the iPhone retailers pushing insurance on people who probably don’t need it? Sure, £269 is a lot to stump up if you lose your phone but it’s a big difference from the £600 that I was quoted for a new handset and £135 is not a small amount for insurance that I probably don’t need (chances are my household contents insurance covers me – albeit with a large excess). It seems to me that O2 are preying on consumers’ insecurities (and Carphone Warehouse seem to be even worse, based on the contents of an Apple forum thread).
I’m surprised that Apple would risk their strong brand dealing with companies that operate in this manner (I guess that’s what happens when you deal with the Devil – i.e. pretty much any telecommunications company) but I’m now seeking confirmation that my insurance has been cancelled without charge (I believe that UK law gives me 14 days to cool off from any insurance policy and I’ve yet to receive any written details of the cover) as well as a goodwill credit on my O2 account to cover me for the worry and inconvenience that this has caused. I’ll post an update if there’s any significant news on this…