The UK's Financial Conduct Authority (FCA) is considering imposing fine on mobile insurance firms for examples of poor practice in a number of areas such as bad products design, unclear terms and conditions, and inadequate handling of consumer complaints.
The market regulator published a review into functioning of the main insurers and found that nine mobile insurance firms have employed a number of poor practices and were not treating the customers fairly.
In a statement, the UK watchdog said, "Mobile phones are increasingly central to everyday life, so it is important that insurance policies provide the level of protection that they promise, and claims processes are fair."
"Claiming should not be difficult, and terms and conditions should not be so unclear that it is virtually impossible – in some cases – to make a successful claim," the statement added.
The FCA claimed that on most of the occasions, some firms were not thinking that why high numbers of claims were being rejected, and were not feeding that back into their product design process.
The insurance policy was not always designed to meet the needs of consumers and the majority of policies promised to cover losses, but actually did not cover instances where the customer accidentally leaves their phone somewhere.
All the firms have agreed with the FCA findings and have already initiated remedial measures to tackle the issue.
The market regulator is also planning to impose hefty fine on one firm for poor handling of complaints in July.