Beware mobile phone insurance scams

The other day I found myself in a medium-security prison observing how mobile phones and other communication devices were smuggled in, hidden in shoes and games consoles. The skills of the prisoners and their accomplices earned admiration from the police and prison officers who discovered the contraband.

Master scammers are not dissimilar to these inmates. They'll exploit every new product and every change in consumer behaviour to ferret out even the smallest advantage. No wonder the evolution of mobile phones from a tool of convenience to our new best friend has become a godsend for fraudsters.

One of the most pervasive examples of this trend has been the recent wave of insurance scams perpetrated on iPhone and iPad owners. Fraudsters made some early forays into this area about five years ago, targeting conventional mobile phone users, but the level of fraud exploded when smartphones arrived on the market.

How the scam works...

George Owen, a 29-year-old cameraman, recently bought a new iPhone, and within days, received a call from a company saying that it was aware he had just purchased an iPhone and asking him if he would like to buy insurance for it.

The caller had got all his details from his phone provider, so George assumed the call was legitimate. He went ahead and insured not just the iPhone but two other phones he used for business.

George ended up losing hundreds of pounds before he realised what was happening. "I'm pretty scam-aware, but I still fell for it. I thought it made sense getting the call just after I bought my iPhone. It never crossed my mind it could be fraudulent," he says.

George is not alone in falling for this scam. Although finding out the exact number of victims is an impossible task, consumer groups' complaint boards and internet forums are full of similar stories.

To initially gain their victim's confidence, the fraudsters often claim to have a relationship with a mobile phone provider, such as O2 or the Carphone Warehouse. They may get hold of the personal details of the new phone owners through intercepted post or internal fraud at some of the big mobile phone companies.

Consumer Direct suggests that sometimes it could also be through serendipity. Fraudsters apparently buy a phone from Carphone Warehouse, for example, and simply ring 500 phone numbers on either side of their new number. Each person who answers is then read the same script offering insurance on their new phone.

Trading Standards, the Financial Services Authority and Consumer Direct are working closely with the big phone providers to stamp out this type of fraud. However, despite their best efforts, it shows no signs of abating.


Those who do fall victim always express amazement that they were so gullible. One Carphone Warehouse customer, who wants to remain anonymous, was embarrassed at the ease with which he was ensnared. "I keep asking myself why did I fall for it?" he says.

"It was because I had a brand new mobile phone number and hadn't told anyone what it was. I couldn't believe that anyone could have bought or obtained my number so quickly after I'd activated it, so I assumed it was alright. I did feel uneasy while I was giving the man all my card and address details. I was thinking all the time: 'this is unsafe, what am I doing?' - but I still went ahead."

The most irritating thing about all this is that you may not know you've been scammed until you need to claim on your insurance and find that the bogus insurance company cannot be contacted, but your premium is long gone.

If this happens to you, contact your bank and report the transaction. If you've paid by credit card, you're likely to be entitled to a refund; in some limited cases, debit card users will also be entitled to a refund.

If you need mobile phone insurance, check out the best deals online or ask your provider - there are plenty of alternatives to taking the risk of doing business with a cold-caller, no matter how plausible they appear to be.

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Your Comments

Please remember, some companies using these means to contact new customers are not all fraudsters. There are legitimate companies out there that are genuinely offering a better/cheaper deal than the networks or high street providers.

Further to the above comment, there are some details that the genuine provider will know, including the make and model of the phone. If the 'referral' has come from the high street store or network then they will also have your direct debit details if the phone was bought on a contract.

Finally, look out for key signs. The 'provider' is obliged to read or offer to send you the direct debit guarantee as regulated by the FSA. If they are not doing this then they are likely to be fraudulent.

It always amazes me that credit card companies continue to offer merchant facities to these fraudsters,

Also, has anyone thought that the spotty teenager working in the shop could be getting back-handers from the fraudsters for supplying details of the phones sold each day. Sometimes the perpetrators are nearer to home than we think.