Phones 4u broker fined £2.8m for poor complaints handling

The Financial Conduct Authority (FCA) has issued its first fine to an insurance company and ordered the broker that managed mobile phone insurance for Phones 4u to pay £2,834,700 for poor complaints handling.

Policy Administration Services (PAS) was responsible for all customer relations, claims and complaints for mobile phone insurance policies sold by the high street mobile phone retailer.

The FCA said PAS was unable to treat customers fairly and come to a balanced decision about whether complaints were valid because it failed to record them.

This failure meant management information and regulatory reporting were wrong, and also that it was unable to see which areas were repeatedly being complained about so that it could put them right.

The regulator also found complaints were not fully investigated or resolved appropriately or consistently.

The fine covers poor complaints handling between June 2009 and September 2011. PAS settled at an early stage of the investigation and qualified for a 30% discount. Without the discount the fine would have been £4,049,637.

Since the investigation, PAS has employed a third party to review its complaints processes. It has also conducted a review of 7,099 complaints and paid compensation to 1,438 customers.

FCA director of enforcement and financial crime Tracey McDermott said: “PAS had wide ranging failures across its complaints handling processes - it failed to investigate complaints properly or to keep accurate records. This is simply not good enough - it does not meet our requirements and does not meet the needs of customers.

“Proper complaints handling is essential to ensure customers are treated fairly. It is also a key tool to help firms identify where things are not working as they should and allow them to take steps to put problems right themselves.”

The fine follows last week’s publication of the FCA’s review of mobile phone insurance, which found a gap between what customers expect and what they are really getting.

“I wholeheartedly recommend that all insurance firms – not just those in the mobile phone insurance market - read the two together,” McDermott said.