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Cellphone Insurance Crusader--By Accident

Kim Hart

Sometimes a problem has to hit home to trigger change. For Maryland Attorney General Douglas Gansler, that happened when his 13-year-old son lost his cellphone.

Gansler had purchased a cellphone insurance policy intended to replace lost, stolen or broken cellphones. Under the insurance plan, the Ganslers paid a monthly fee of around $5. But when his wife called Asurion Protection Services, the company providing the insurance, to request a replacement phone, she was told she would have to pay a $50 deductible. She also learned the replacement phone may not be brand new--it may be a refurbished handset.

Gansler said he wasn't aware of the policy terms, and spoke with many other Marylanders who've had similar experiences. So he's spent the past eight months brokering a deal with the four major wireless carriers. AT&T, Verizon Wireless, Sprint Nextel and T-Mobile, who all provide insurance through Asurion, have agreed to provide more information about the policies to consumers before they agree to buy the service.

"If the customer was actually aware of what they're purchasing, they would not purchase it," Gansler told me via cellphone after hosting a press conference in Rockville.

He said he wasn't sure how many formal complaints his office has received about problems with cellphone insurance coverage, but "everyone I talk to has dealt with this."

Gansler went on to say that Asurion does disclose the terms in a brochure given to customers when they buy the policy. But he never got around to reading it.

"I'm 45 years old and I've never read through one of these 35-page pamphlets with fine print," he said.

Asurion, which handles the premiums and claims for underwriter CNA, said its policy terms, such as the monthly fee, the deductible amount and the condition of the replacement phones, have always been disclosed, either by a brochure at the point of sale or a follow-up postcard sent to new customers.

Gansler "has stated on many occasions that when he purchased a cellphone, he never read the brochure that he is complaining about, which fully disclosed all the key terms of the policy," said Lanny Davis, an attorney for Asurion. "In fact, he has repeatedly said, 'I never read brochures.' The brochure he used at the press conference was not the one made available to consumers, which he probably did not realize because, as he says, he doesn't read brochures."

I checked with the Attorney General offices of other states that have a history of taking action on wireless issues.

The Illinois office has a record of four complaints, three of which were mediated and resolved. The Attorney General of Texas is not currently looking into this issue, a spokesman said. But the office has taken steps to reduce general deceptive billing practices by cellphone companies in the past.

The agreement Gansler secured with the wireless companies will provide more prominent notice of the policy terms in stores and on Web sites. Customers will also sign an acknowledgment that they've seen the terms. Some salespeople will be retrained. The agreement is currently effective in Maryland only, but Asurion said it will take similar actions nationwide.

Asurion also agreed to donate a total of $1.5 million to the carrier-sponsored charities with a presence in Maryland, such as Sprint's Project Connect, which supports online safety, and T-Mobile Huddle Up, an after-school program for kids of single parents.

I asked Gansler if he has a particular interest in other wireless consumer issues. He said there were no plans in place as of yet.

"This is the biggest issue that has come to our attention," he said.

By Kim Hart  |  April 4, 2008; 4:51 PM ET  | Category:  Kim Hart
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Please email us to report offensive comments.

Huh. An insurance company taking a consumer's money and hiding the policy terms in mass quantities of fine-print legalese. How 'bout that.

Way to go Gansler. I'm sure this'll put a stop to it.

Posted by: jp | April 5, 2008 2:10 AM

I purchased a new T-Mobile Wing and an insurance policy. Since I was on call and the new phone didn't have a full charge, I left the SIM card in my old phone and left the store with my new phone in the original box. Some kids followed me out of the store, mugged me and stole the phone. It was a witnessed theft reported to the police. The insurance company would not cover the theft, however. Their rules say the SIM card must be in the phone before they will cover it for theft. So much for theft insurance.

Posted by: AKirkemoMD | April 5, 2008 11:10 AM

I got a new T-Mobile phone several months ago, read through the policy and decided not to purchase the insurance based because:
-the phone was $500, the deductible would be $50-150
-i may not get an exact phone replacement
-it might not be new
-the policy would pay a max of $200 or so


Posted by: T-Mobil | April 5, 2008 1:24 PM

Mr. Gansler is the Attorney General of Maryland and failed to read the terms of a legal agreement??? And because of that, Marylanders will now have the terms read to them like fifth graders?? (And pay more for their insurance, since that $1.5 million in charitable donations Mr. Gansler has extracted from Asurion will simply be passed through to consumers.)

And, no, you don't get a brand new phone because you didn't lose/break a brand new phone.

There are two things wrong with providing a brand new replacement.

First, doing so creates a moral hazard, a term much in the news of late with respect to the mortgage meltdown. If my current phone doesn't have GPS but the new model does, I will be tempted to "lose" my current phone so that I can get a new, improved one on the insurance company's dime. Since product lifecycles in the wireless world are like those of Mayflies due to all the new bells and whistles, this is a non-trivial concern.

But, second, when I lose my phone, I just want the same one to replace it so I don't have to learn a new operating system and so all my peripherals will still work (extra battery, cigarette lighter adapter, etc.). It's arguably a convenience to the consumer to receive an identical replacement, even if it is refurbished.

Mr. Gansler, the next time your son loses a phone, please don't impose the burden on Maryland's wireless subscribers. Instead, please just go on eBay and bid on a used replacement phone.

Posted by: PhoneMan | April 5, 2008 8:48 PM

Phone Man has it exactly right. No wonder our taxes are going up in Maryland. Eight months the Attorney General spent on this critical issue to protect the lazy. My son and daughter have both lost cell phones and I was amazed at how efficient Asurion was in replacing them. I had my new phones within two days and they even upgraded us to the newer models because the old one were no longer available. Instead of focusing on any meaningful issue Gansler instead bullies Asurion into a charitable donation and a few other useless and meaningless actions. I guess we got exactly what we wanted in an Attorney General who campaigned that he was going to be the Eliot Spitzer of Maryland.

Posted by: Md Taxpayer | April 5, 2008 10:55 PM

Consumer report did a pretty detailed analysis of these warranties people buy for expensive electronics. It ranged from big screen plasma TVs to fancy phones. The overwhelming consensus is that it's an utter waste of money due to the hidden fees and deductibles. The manufactures typically have a one year warranty so if the product is a lemon it would go bad within a year and would get replaced free of charge.

Posted by: Mike | April 6, 2008 8:20 AM

Mike, no argument from me that extended warranty coverage on most consumer electronics isn't much of a value.

These cell phone plans however, cover loss and accidental damage that extended warranties don't: theft, fell in the pool/river/toilet, my dog ate it, etc., so it's closer to "all perils" coverage.

And now these plans will cost Marylanders more because Attorney General Gansler didn't read his agreement and went all Spitzer about it (in a legal sense, that is), as Md Taxpayer notes.

Posted by: PhoneMan | April 6, 2008 9:41 PM

I am currently in financial trouble in a desperate search for a legal finance company to give me a lawsuit advance due to my injury from a recent accident. I came about this website which helps individuals search for the best advances to help with my current financial condition by going through many legal finance companies. It is free. Take a look at it.

Posted by: Mel | April 15, 2008 1:31 AM

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