Phone insurance is often one of the scammiest parts about buying a new phone. It’s a moneymaker for carriers, so salespeople are taught to push it hard, leading to endless complaints about unethical (and often illegal) sales practices. It’s also something that regulators are increasingly on the lookout for, as evidenced by a fine handed down by Washington’s state insurance commissioner over a violation of state law.
State Insurance Commissioner Mike Kreidler issued a fine earlier this week against T-Mobile, owing to a recent promotion that required new customers to sign up for phone insurance in order to get a deal. Terms and conditions for switching deals are standard practice in the mobile industry, but the requirements are normally something like porting in a number or adding a line. There’s a good reason those conditions normally don’t include insurance.
As it transpires, inducing customers to buy insurance — basically, using any kind of pressure or convoluted sales tactic, such as offering a deal — is illegal in Washington state. So when T-Mobile ran a deal last year offering a discount to customers who switched from Verizon and purchased phone insurance from T-Mobile, that violated state law. Kreidler’s office explained in a statement:
T-Mobile, a cell phone carrier, is also a licensed insurance producer in Washington state. The company offered to pay off phone loans and early termination fees for Verizon customers who switched to T-Mobile and purchased its insurance between May 31 and Aug. 2, 2017. The offer is illegal in Washington state because it induces people to purchase insurance. During the promotion, 927 Washington consumers purchased the plan, which cost $15 per month.
The penalty is a $20,000 fine, which has been levied on T-Mobile.