Beware mobile phone insurance scams.

Beware mobile phone insurance scams

Scammers are homing in on new mobile phone owners, cold-calling victims as soon as they activate their number to offer bogus insurance. 

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.

Stop paying for pointless cover

Are you wasting thousands of pounds on useless and expensive insurance?

You could be paying for insurance you simply don’t need or — worse — paying twice to cover the same thing.

Why? Because insurance companies frequently look to make extra cash by bringing out great-sounding policies that actually fulfil very little need — then hard-selling them to customers.

We take you through some of the worst offenders:

Accidental death insurance

Accidental death insurance is designed to pay out in the event you die in an accident. However, there are a number of exclusions to this type of policy depending on your provider.

Some policies won’t issue your family money if you were to die doing something they deemed too risky, such as rock climbing or having an accident under the influence of alcohol. Also some policies will not accept a claim if the death was a result of a mental or physical illness.

Sometimes insurance companies will offer customers this policy free of charge for a set amount of time and then try to up-sell it down the road.

However, in many cases incidents such as car accidents and fires are already covered by car and home insurance while accidental death is often protected with standard life insurance.

Get £150,000 life cover from £2.71 a week

Extended warranties

If you’re buying an expensive item for your home, odds are it already comes with a factory warranty. The retailers you buy them from will typically offer an extended deal but don’t fall for it, extended warranties for two years or more can be almost as expensive as the item itself and the chances of something breaking outside of the initial 12 months but within the three years you’re being offered ‘extra’ cover for are really low.

ID theft insurance

ID theft protection insurance is designed to protect you in the event that fraudsters empty your bank accounts and run up large bills on your credit card.

This can occur if thieves were to get hold of important documents such as your bank statements.

While identity theft can be a nightmare, you should already be covered by your bank as long as it wasn’t through your own negligence that the fraudsters took advantage of you.

One of the best ways to avoid identity theft is to invest in a good shredder and be as sensible as possible.

Life insurance

Life insurance is designed to protect your family and others who depend on you for financial support. But it’s often sold as if it’s a requirement to people buying a home.

Typically, the only reason a single person would need life insurance is to pay for their funeral. However, if you have other arrangements, taking out a life insurance policy would not be a necessity.

Payment protection insurance (PPI)

Payment protection insurance is designed to cover credit card and loan payments if you are unable to keep up repayments in the event of an accident, unemployment or sickness.

This product has come under scrutiny in recent years because of the way it has been sold.

Many companies try to sell you this type of insurance when you take out a loan, credit card or mortgage, however, PPI is optional and is not a requirement when taking out a line of credit.

This product has been widely criticised for being expensive for the limited benefits it offers. What’s more, there are many exclusions that insurers include such as being unemployed when you took out the policy, having certain medical conditions or even being self-employed – depending on your insurer you may be ineligible to make a claim.

The risk for unsuccessful claims with PPI is far greater than the benefit of peace of mind.

Handbag, bike and mobile phone cover

Specialist cover for handbags, bikes and mobile phones are just a couple few of examples of this product-specific insurance.

Sounds like a great idea, but these items are generally already covered when you leave the house if you have an ‘all risks’ home insurance policy. Check your existing policy wordings if you’re not sure.

If you don’t have an ‘all risks’ policy already and want to ensure the contents of your pockets or bag are covered, compare the price of the specialist cover against that of upgrading your home insurance before you buy.

The 10 most common scams

As fraudsters get more sophisticated, we need to be on our guard. Nathalie Bonney reveals the 10 most common scams and how to avoid them.

Ever received a letter congratulating you on winning a lottery you’re sure you never entered, or received a phone call telling you to ring some expensive premium-rate telephone number in order to claim your ‘star prize’?

While some scams are fairly easy to spot, others aren’t. Although we might pride ourselves on our ability to smell a rat a mile off, swindlers aren’t stupid; they make their operations look as plausible as possible.

In fact, according to Consumer Direct, three million UK adults fall victim to mass marketing scams every year — losing on average £850. And these of course are only the official figures; a large number of victims don’t report their experiences.

Unfortunately, if you’ve fallen victim to a scam, catching the swindlers and getting your money back is extremely tricky. “It’s a sad reality that it’s very difficult to get any money back at all, because a 
lot of the scammers are based overseas and can be incredibly difficult to track down,” says Frank Shepherd, a spokesperson from Consumer Direct.

With so many mass-market scams ready to trip us up, and our relative powerlessness in the face of them, the best cure is prevention. “If it sounds too good to be true, it probably is. Exercise a good degree of scepticism,” advises Shepherd.

Moneywise reveals below how to spot the top 10 most common scams, how to avoid them, and what to do if you’ve been caught out.

1. Premium-rate telephone numbers

You will receive some form of correspondence via post, a text message or automated voicemail informing you that you have won a major prize and all you need to do to claim it is call an 090 premium-rate number.

You will invariably be kept on hold for a long time, all the while racking up more costs. Even though you may realise each minute is costing you more money, the temptation is to keep on waiting to find out what you’ve won. Nearly everyone who does call in gets a prize, but it’s a token gesture, particularly when compared with all the money you have spent on the phone call.

An estimated 1.08 million people fall victim every year, according to the Office of Fair Trading (OFT), making this one of the biggest scams. The average victim loses around £80.

To protect yourself against these types of calls and texts, register your phone number with the Telephone Preference Service at or call 0845 070 0707, which will reduce unwanted sales calls and messages.

You can also check with your telephone company if it offers a number-blocking service: it should be able to block withheld UK numbers. To report the scam, you can forward the unwanted texts to Phonepayplus on 020 7407 3430. Alternatively, call it on 0800 500 212 or go to

2. Pyramid selling

These schemes invite you to sign up to a money-making club, typically through websites but also through friends’ invitations. The premise is that you have to pay a small joining fee and then invite a specified number of other people to join in order to claim your reward.

The reality is that only those at the top of the pyramid can expect lucrative rewards. Matrix schemes work in a similar way but offer a gadgety gift instead. We fall for pyramid and matrix schemes in part because they come across as reasonable propositions.

However, you should steer clear of these types of money-making schemes, especially the ones that ask you to sign up new members. The swindlers are relying on you failing to recruit enough members — and so far this has paid off, with the average victim of pyramid selling losing £930.

3. Internet dialler

We’re all getting pretty good at recognising spam emails and hitting ‘delete’ straight away, but awareness of internet dialler scams is lower.

All you have to do is click on a pop-up box, open the wrong email or visit a pay-per-view website and without realising it you have downloaded dial-up software that can change your computer settings.

The rogue dialler will connect you to the internet via an expensive telephone line instead of your existing connection — at the average loss of £61.

So make sure your computer has up-to-date anti-virus software and a firewall, think before you click on pop-ups and links that you don’t recognise and beware of leaving your personal details online, which can make you an easy target.

4. Bogus holiday scams

This is one of the most costly scams, with the average victim losing £3,030, according to the OFT. They usually work as follows: you’re handed a scratch card and discover you have won a free holiday. You have to attend a presentation to collect your prize. The presentation is usually at a swanky hotel, with glossy brochures and posters all adding to the air of authenticity.

However, genuine holiday clubs will allow the consumer time to look over a contract before signing it, while bogus holiday clubs will pressurise hopeful holidaymakers into signing on the dotted line, without reading through everything properly.

After committing yourself you will suddenly find that your ‘free’ holiday has a lot of extra costs, such as transport and other less obvious but nonetheless ‘compulsory’ extras.

Be especially wary of presentations that ply you with unlimited alcohol or offer special discounts that only last that day, and withstand the pressure to sign anything until you have taken the information away with you to study in your own time.

If you have already signed up to one of these clubs, contact the UK’s European Consumer Centre (ECC) on 08456 040503 or via its website, The ECC can advise you on your rights in your specific case and help in cross-border disputes.

5. Prize draw/sweepstakes

You will usually receive a letter, email or telephone call that tells you that you have won a large prize. To claim your winnings you have to purchase some smaller prizes or send an administration fee.

Swindlers rely on the fact that the small print is in a font that’s so small most people won’t bother to scrutinise it. However, if you do read it, you’ll discover that you’ve simply been given the opportunity to enter a sweepstake you have only a very small chance of winning.

Compared with bogus foreign lotteries and advance-fee scams, which offer much vaster sums in prize draws, these scams seem more plausible because the amount of money is more realistic.

You can check if the mailing comes from a member of the Direct Marketing Association (DMA) at To reduce unwanted mail, register for free with the Mailing Preference Service at or call 0845 703 4599.

6 Work at home / job opportunities

Who wouldn’t relish the idea of rolling out of bed, making yourself some breakfast, and then settling down to work while still in your pyjamas?

Thanks to more people facing financial worries, work-at-home scams have claimed a special place in the swindlers’ armoury. Whether you’ve been made redundant and are looking for interim work, or need to supplement your existing income, these scams offer opportunities to earn extra cash for very little effort.

Promises such as “You could make a small fortune in your coffee break” or “Get paid over £76,000 for just 90 minutes’ work”, illustrated by personal case studies, are appealing and usually appear genuine.

The swindlers make their cash through registration fees, but you’ll soon discover that the amount of work you need to put in to recoup your initial outlay — let alone make a profit — is totally disproportionate.

If you would like to work from home, it’s better to approach local companies that have a known presence as opposed to a faceless website or telephone service you’ve seen advertised on a poster. Contact Homeworkers Worldwide on 0113 217 4037 or go to

The truth about working from home

7. Miracle health cures

Who wouldn’t pay for diet pills that meant you could literally have your cake and eat it? Like other unsolicited mail or emails, health swindlers aim to appear as professional as possible, reeling off an impressive amount of medical qualifications and fake personal testimonials from “satisfied customers”.

Look out for exaggerated claims and don’t let your desire to believe the claims overrule the logical part of you that knows they probably aren’t true. Philip Hodson, fellow at the British Association for Counselling and Psychotherapy, illustrates how the scams work.

“I recently got a spam email, apparently from HM Revenue & Customs, offering me a £1,500 rebate on my tax. I forwarded it on to my accountant, asking ‘Is this a spam email?’ I knew it was, but I still asked the question,” he said.

Although Hodson’s example isn’t medically related, the same principle applies — even more so when the scam exploits the desire to be thin, or free of an illness or debt problems. Seek professional advice before answering this kind of email.

The tax refund scam explained in detail

8. Clairvoyant letters

Victims receive letters in the post warning them that if they don’t reply they could face bad luck or even endanger their family. The letters appear to be addressed personally to the sender and often come with a photograph of the supposed expert.

Marilyn Baldwin, founder of the Think Jessica campaign, which supports families of chronic scam victims, points out how scammers particularly prey on the older and often more vulnerable members of society.

“Older generations can be overly trusting and don’t understand that they are mass mail-mergers,” she says. “They imagine it’s one person at a typewriter tapping out personal letters.”

The average victim loses £240 to swindlers, but in addition to the financial loss, bogus clairvoyant schemes, like other mass-mail schemes, can also cause emotional damage. Baldwin set up the Think Jessica campaign after her mother Jessica became a chronic scam victim.

A chronic victim is someone who repeatedly falls victim to scams — if you think a family member is being targeted, contact for support and advice.

9. Foreign lottery scams

Logically, if you haven’t entered a lottery, you can’t win it, so any letters or emails that tell you otherwise should be treated with suspicion.

The ‘winner’ will be told to phone the prize line, which unsurprisingly is a premium-rate number, or asked to send off a cheque for a small amount to cover administration fees.

Of course, the promised huge cash prize never materialises and the swindlers make a tidy sum from the thousands of victims’ payments. The key to their success is to offer such a large amount of money that you’re blinded by the figures, and the admin fee appears minimal in comparison.

“You fall into the trap of thinking ‘it’s only £20’. But if you send it you’re likely to be put on a list [known as a ‘sucker’s list’] for other mailings and will be more regularly targeted in the future,” warns Shepherd. “Consider contacting the mail and telephone preference services to reduce this type of marketing.”

10. Money loans

You often come across advertisements in local papers offering fast money loans without formal credit checks. You call up a freephone number and are then told that your loan is agreed but you need to pay insurance costs via a money transfer. But once you’ve paid the fee, you never receive your loan or hear from the company again.

Never, ever give your bank details to someone you don’t know, and be sure to report the swindlers too. If you have fallen victim to this scam, report it to the police and the OFT.

Although it isn’t easy to track down the perpetrators, the more victims report their experiences, the easier it will be to stop them in the future.

Other scams to avoid at all costs…

African advance fees: One of the swindler’s most lucrative ways to make money — on average, a victim loses £5,000. They pose as a government official, charity worker or similarly well-respected professional, and ask for help transferring money overseas.

In return for using your bank account, they promise to give you a chunk of money — typically, around 25-30% of the transfer sum. All they really want, however, is your bank account details.

Career opportunities: Aspiring novelists, models and inventors are lured by advertisements promising to turn their dreams into reality. However, in order for the manuscript to be published, the invention patented or the model to step onto the catwalk, initial outlay costs and fees must be paid upfront.

Property investment: These scams cost victims an average £4,240 a year. You are invited to attend a free presentation about making money from property investment, but whereas the real thing would allow you time to go away and think it over before handing over any money, the fake setups push for money straight away.

Swindlers’ top tactics

  • They strive to look as professional as possible, even warning people of ‘bogus scams’ to make themselves look more genuine.
  • They create a sense of urgency to make victims respond immediately so as not to lose out, and this prevents them from reading through the information carefully.
  • They create an air of secrecy to supposedly protect the ‘win’, but actually to protect themselves and make ‘winners’ less likely to tell friends and family who might convince them it is fraudulent.
  • They make the victim feel that they have been personally approached or targeted so they believe they are special.
  • They offer amounts of prize money or returns that seem feasible. Or they ask for a relatively small admin costs compared with the final prize, making these costs appear very reasonable.

Five ways to make sure you don’t get swindled

1. Read the small print on any documentation you receive and make sure you understand it all before agreeing to anything. Don’t rush into decisions.

2. Don’t be taken in by the apparent authenticity of a document or professional appearance of a company.

3. Check the company is legitimate by asking for full contact details, including the street address and local telephone numbers.

4. Never pay for a ‘free’ gift or reveal any personal information; this will be used to bombard you with future scams and possibly take more money off you.

5. Trust your gut instinct.


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