The Financial Conduct Authority reviewed the practices of nine firms that have a majority share of the mobile phone insurance market – focusing on the way mobile phone insurance firms design products and handle claims from customers that have lost or damaged their phone, or had it stolen.

Mobile phone insurance can be useful, but the watchdog found some examples of poor practice in a number of areas: products were not always designed to meet consumers’ needs, the majority of policies promised to cover loss but in practice did not, descriptions of what was and was not covered were left unclear as well as a slow claims handling processes.

Clive Adamson, the FCA‘s director of supervision, said: “With mobile phones now essential to our lives – and mobile phone insurance often many young people’s first foray into insurance – it is important that insurance policies provide the level of protection that they promise, and claims processes are fair.

“What this review shows is that sometimes there is a gap between what the customer thinks they are getting, and what they are really getting. Closing this gap will lead to greater trust and confidence.

“We have begun communicating the findings to the firms that took part in the review and they are making improvements. Mobile phone insurers need to continue in this vein and show their customers that they are putting them at the heart of their business models, and offering everyday insurance products that do what they say on the tin.”

The review also contains real-life examples of firms not treating their customers fairly. In one case, a claim was declined because the customer knew where they’d accidentally left their phone; while in another a claimant was rejected because she left her phone in a hotel room, which was deemed to be a public place as soon as she checked out and therefore was excluded from cover.

The watchdog wants mobile phone insurance firms to make significant changes so that it is fairer for the consumer, including handling claims promptly, removing ‘two stage’ claims process – where a claim might be initially rejected but where the customer is persistent and complains this is then sometimes overturned, alongside making terms and policies much more clear.

Consumers that already have mobile phone insurance, or are thinking about buying a policy, should:

• check whether they are already covered, for example via a packaged bank account;

• check what the policy covers and the policy excess; and

• complain if they are not satisfied.

If consumers are unsure about anything to do with their insurance policy, or don’t understand some of the small print, they should ask the insurer to explain.

The FCA advised that in the event a consumer needs to complain: the first step is to make a complaint to the firm named on the policy documents. If they are not happy with that response they can then take the complaint to the free and independent Financial Ombudsman Service.