High-Pressure Sales Tactics Lead to Multi-Million Pound Fine

13 May High-Pressure Sales Tactics Lead to Multi-Million Pound Fine

Insurance sold by retailers is increasingly tightly regulated by national authorities. Those stores selling mobile device insurance are under particular scrutiny, especially in Europe. The UK watchdog Financial Conduct Authority (FCA) is one of the toughest investigators, and does not deal lightly with perceived consumer exploitation. Recently, it fined the UK mobile retail giant Carphone Warehouse a record £29m for ‘mis-selling’ their insurance product Geek Squad. Similarly, DGCCRF (Direction générale de la concurrence, de la consommation et de la répression des fraudes) has fined the French insurance broker SFAM around €10m according to Le Parisien (Source: Teller Report). SFAM misled their customers with disguised insurance contracts. This practice led to over a thousand filed consumer complaints and was followed by a heavy penalty.

Such actions by regulatory authorities tarnish the general reputation of the insurance industry (especially those selling mobile device insurance), which negatively impacts companies that do not deserve the criticism. After all, mobile device insurance plans are here for a reason – they actually serve a useful purpose to the customer. If done right, consumers both want and appreciate the right protection for their smartphone, tablet or computer. Consumer surveys and feedback prove it!

Why was Carphone Warehouse Fined?

The FCA offence was mainly due to Carphone Warehouse’s sales practices and ‘objection handling’. The FCA found the phone retailer failed to give its agents the correct training to offer suitable advice to clients, saying employees were trained to push Geek Squad onto consumers in all cases – even to those who already had cover through their home insurance or bank accounts.

Mark Steward, the executive director of enforcement and market oversight at the FCA, states: “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.” The FCA also claims sales staff were trained in ‘spin selling’ and ‘objection handling’, sales persuasion practices that focus on overcoming customer objections rather than assessing whether the product is suitable for them.

Pressure sales tactics like objection handling must prioritise customer interests, not ‘getting that sale at all costs’.

In the eyes of the watchdog, this was a clear violation of their code of conduct and it subsequently slapped the Carphone Warehouse with a fine of £29.1m for mis-selling. A further £2.3m in compensation is owed to around 28,000 customers in compensation for inappropriate cancellation charges.

The Takeaway Lesson for Insurers

To avoid such costly business mistakes (both financially and in reputation), retailers offering insurance must take heed. Namely, customer service must be the absolute top priority. Implementing the following 5 pieces of advice should ward off negative customer experiences that in the worst case can lead to authority investigations and larger repercussions.

5 Steps to Superior Customer Experience

1.Design an insurance package that exceeds customer expectation.

In other words, offer a compelling value proposition that goes beyond traditional insurance, e.g. broader risk coverage and superior services such as 1h repair or next day replacement. Additional perks like technical support, a free-of-charge screen protector or a device case gain many consumer brownie points!

2. Continuously train frontline employees in properly explaining and selling your product.

Ensure all agents have in-depth knowledge of insurance in general as well as your insurance cover. As we can see from the Carphone Warehouse example, it is vital that staff are taught to explicitly find out what other insurance plans customers might have and in which cases not to recommend the product. A common misconception is that staff training is a one-off investment at the beginning of a project. Not true! Employee coaching to best practice standards requires constant effort and monitoring.

3. Provide all clients with simple and clear customer documents.

We have to face the reality that face-to-face sales time in stores is scarce. Consequently,  the customer might not have obtained a deep insight into all the features and small print of your insurance terms. To avoid misunderstandings and possible complaints or cancellations, it’s crucial to make every effort to ensure customers know what they are signing-up for. The information you give out could include a product-overview  flyer, a concise product information sheet and an easy-to-read summarised terms & conditions. The shorter the ‘small print’, the higher the likelihood that the customer will actually read it. This both avoids any legal issues as well as fully educating and reassuring your consumer.

Make sure your customers are in the know about the terms of your offer by providing easy to read documents. 

4. Implement a constant and rapid-response ‘improvement cycle’.

This includes rigorous tracking and analysis of any customer complaints and cancellation reasons. For example, if a customer complains that he was not properly informed about the insurance cover in the sales process, identify the respective store and/or responsible employee and immediately send a trainer to this store to fix the sales practice.

5. Decide in the best interest of your customer, always!

In case anything has gone wrong, which invariably happens in large retail networks with several hundred stores, always prioritise the customer no matter what, and resolve the issue as fast as you can. A bad customer experience is much more costly than the contested claim.

Learning From i-surance

Remember that a customer-first approach is a vision beyond merely adhering to regulations or being the altruist. The service mindset creates revenue as a direct byproduct. Case in point, the rise of i-surance.

i-surance’s growth is entirely due to following these five steps as well as their fundamental ethos of putting customers squarely first. They offer only fair value propositions as well as striving to provide an extraordinary service experience to every customer, every time. i-surance trains its distribution partners in-store regularly on how to be transparent and upfront, and has an inbuilt measurement system with improvement cycle in place. These core practices led to i-surance boasting the best customer service experience in the market, and mean that partner retailers need not fear a dreaded situation like Carphone Warehouse or SFAM did.

Constantly train frontline employees in properly explaining your product to avoid mis-selling.