Industry insiders claim handset insurance market is becoming a “billion pound industry”
The sight of fellow commuters looking at cracked phone screens has become all too common in recent years. Mobile News headquarters is filled with the most tech-savvy people you’ll meet but not even half have their devices insured. Go around your office and you’ll probably find similar results.
Yet, this could soon be a thing of the past as the billion pound mobile insurance industry continues to grow. London-based financial analyst Finaccord conducted research on mobile insurance in July this year from a sample of 1,700 mobile insurance providers, operators and manufacturers across 40 countries. It claimed handset insurance was worth £10 billion last year and predicts this figure to grow to more than £14 billion by the end of 2019.
Billion pound industry
Many throughout the B2B industry, such as insurance provider Assurant, have benefited from this prosperity. The New York-based company has been established for over 125 years, but its mobile insurance products have only been on sale for the last 12 years. Despite this, the firm claims to have 170 million device policies worldwide. More than 30 million of these have been processed throughout Europe in partnership with B2B clients. Its European and US clients include EE, Telefónica, Google, OnePlus, Samsung, Lloyds Banking Group and Barclays and others.
Assurant president of Europe Andy Morris is certain the industry will continue its prosperous growth. He tells Mobile News: “Last year we had a revenue of more than £2 billion globally. We see continued growth and we’ve generated more than £1.5 billion so far this year.
“It’s a billion pound industry, put simply. If you look at the behaviours of consumers and the usage of mobile technology handsets are a part of our everyday lives.They’re more than just a piece of metal that we put in our pockets.”
Pier Insurance CEO Mark Gordon agrees, adding overall resale value of mobile handsets is a major driver. He says: “Mobile provides the lion’s share of the gadget insurance market. People use them all the time and there’s real value in mobile phones when compared to other technology, such as TVs.
“Our own calculations predict that the market will be worth up to £700 million by the end of this year. It’s growing at a rate of four per cent per annum. It’s growing close to a billion pound industry.”
Rise in handset insurance
A major contributor to the mobile insurance market’s recent success is the introduction of the iPhone in 2007, which most agree introduced the idea of the smartphone to the world. Before the introduction of the device, the Nokia 3310 was considered one of the best-selling devices of all time, with more than 160 million units of the device being sold since its launch in 1999. This pales in comparison to the billion iPhones sold since Apple’s smartphone was unveiled.
According to Canalys, Apple was second for smartphone market share last year with 16.9 per cent globally. It was only beaten by Samsung who held a 23.6 per cent share. Additional figures from the analyst revealed that of the 20.3 million smartphones shipped this year, 9.7 million cost more than £600.
Recent figures from Compare My Mobile also suggest the iPhone is the most valuable handset on the market, with 40.44 per cent of trade- ins through the site being devices from the Californian manufacturer. The company added that the average trade-in value for an iPhone is £199.38 compared to other devices with a value of £144.80. Additionally an 128GB iPhone 6s Plus can fetch up to £406.95, losing just 30 per cent of its original £699 price tag.
Pier Insurance has felt the positive impact of the iPhone. The Essex-based company has processed more than 870,000 mobile devices in its 13-year history, counting the likes of Onecom and Chess Telecom as key partners. The multi-million pound business currently processes policies for more than 5,000 customers a month – a number which CEO Mark Gordon, formerly Evolve Telecom MD, claims is a 700 per cent increase on numbers before the iPhone.
“The biggest change to the mobile insurance industry is the iPhone because it’s driven a new market that didn’t exist before. Customers understand the value of the iPhone and that it’s quite expensive to replace. The iPhone is the first real mobile product where the resale value is much better than other handsets or TVs,” says Gordon.
“Not only are iPhones a really valuable product, they’re really easy to break and they’ve created a rise in the number of smartphone thefts. Now we’re seeing five times more accidental damage claims than theft and loss. What drives insurance decisions is the cost – consumers and businesses want to protect these important devices,” he adds.
Supercover Insurance has also felt the benefits. The company processes more than 3,000 claims per month for its hundreds of clients, which include the likes of MDEE,Aerial, Onecom, Olive, Boots, Co-op and Kwik Fit, and claims its new Apple extended warranty product, due to launch through Data Select in December, has received a positive reception. Sales director John Fannon says: “Insurance is a valuable addition to a consumer or business’ suite when they have something valuable like an iPhone.The vast majority of policies we have each month are on iPhones.
“It’s a different time to the rugged old bricks of 10 years ago. It’s not just about breakages anymore, it’s about iPhones have a year warranty, but that’s not enough for those who take it out on a two-year contract. We’re releasing an extended warranty product through Data Select and many are seeing some demand from it. The biggest thing I’ve seen with insurance is the launch of the iPhone.
“If you have 50 iPhones out there, some of them will get lost or damaged. You lose three or four and you’re already having to pay out four 170m figures. It’s a prudent financial move for businesses. iPhones have a year
warranty, but that’s not enough for those who take it out on a two-year contract. We’re releasing an extended warranty product through Data Select and many are seeing some demand we’ll be able to repair it and the resale value will be much better.”
Protect Your Bubble’s head of UK Rob Basinger adds: “The iPhone costs up to £600 and people are leaning more towards handset ownership these days. “Customers are more aware of the value of mobile insurance and this has been boosted by the rise of SIM-only where they expect to retain the device for two or three years.”
Lifeblood of business
It’s equally important for businesses to insure their devices as the cost goes far beyond that of just having to pay to replace and repair the devices. According to recent research from Hewlett Packard Enterprise, the average cost for businesses when replacing a stolen mobile device is more than £47,000. This cost includes the cost price,the time and effort taken to find the device or get a replacement in, getting the data reinstalled and the time it takes to set it up to the individual user.
The company added that of the 70 million phones lost or stolen last year, only 4.9 million were recovered. Some 11.9 million of these unrecovered devices had important corporate data stored on them. Additional research from EE conducted in 2014 found that nearly 10 million mobile devices holding sensitive business data has been lost by employees across Britain.
Supercover’s Fannon adds the critical and personal nature of these devices towards businesses is another key driver in the take up of mobile insurance. He says: “The smartphone meant that mobile phones have never been more critical for a business. It’s a personal transaction unit, it’s your alarm clock and you use it to do work.
“We see a particular uplift for insurance polices in the 17-to- 30 sector, but the mobile phone is just as important to white van men and small-to-medium enterprises. It’s the lifeblood in both the business and consumer worlds. You don’t leave your house without it.”
Assurant’s Morris agrees. “We’re just as obsessed about the needs of a business as we are with a consumer. Not only do people need to use the phones for business, but they want to show them off wherever they are.They need to be in a fantastic state of repair.”
“People rely on these devices for important areas of their business,” said Canalys research analyst Ben Stanton. “You lose the device and [you lose time] in terms of having to find a replacement – when that time could go towards more important things in the business. Losing a device suddenly becomes a major problem for a company.”
Protect Your Bubble’s Basinger adds: “People make a sentimental connection to these devices. They’re not just mobile phones. They are storage mediums, which means people use them a lot for their own business lives. The smartphone has become a fundamental item.”
However, there seems to be a reluctance among many to insure these devices, and this is an area that needs improving if the mobile insurance industry is to continue growing at its current rate. Some suggest the industry needs to be more transparent and not overcomplicate selling terms to users.
According to Protect Your Bubble, the average phone survives just 15 months before being broken, lost or stolen, despite the majority of people being locked-in to contracts of over 18 months.
In addition, a staggering £3.1 billion was spent over the last five years fixing or replacing broken gadgets, according to a study from TSB.
Mobile phones are the item most likely to meet an accidental end, with eight million of the fragile gadgets damaged in the last five years. A survey of 2,000 homeowners revealed that water damage is the greatest phone- killer, accounting for 23 per cent of mobile phone and seven per cent of laptop claims.
In order to extinguish this reluctance, most agree the industry has to make insurance less complicated. Assurant’s Morris says: “I think it’s a natural response for customers to be reluctant.
“There is a trend we’ve seen more and more in the industry. The organisations who put consumer outcomes at the heart are successful. Other organisations who don’t put consumer outcomes first will fail.”
Protect Your broken “The insurance Bubble’s Basinger industry is seeing adds: “I think the challenge for insurers is to broadcast the benefits of insurance a price point that’s attractive.”
However, Supercover’s Fannon claims things have changed in recent years. He said: “I’m seeing that reluctance diminish month on month. In 2015, in the mobile dealer channel, Supercover only didn’t pay off on 3.5 per cent of claims. People have this myth that insurance companies don’t pay off. We do that.”
GfK technology director Imran Choudhary adds: “The insurance industry is seeing massive growth, but there are areas where consumers are confused or they don’t want to spend ages on the phone answering questions. The industry needs to change these problem areas if it is to continue growing.”
It’s not all about being a provider that sells insurance policies off the shelf, either. The insurance market is such a saturated one and providers will need to find various ways of differentiating themselves if they are to reap the rewards.
Data Select’s Ktisti claims the partnership with Supercover has helped it differentiate from other major distributors out there. He says: “Supercover is helping us increase our sales further. Apple Care is fairly expensive, while Supercover’s extended warranty is quite good value for money in comparison.
“The company has staff members who know the mobile B2B industry well. We can usually take them with us to pitch the insurance policies with the confidence that they know the needs of our partners.”
Assurant’s Morris claims the company’s long history is one of its strengths. He says: “Assurant is 125 years old – we have 170 million users worldwide. That history helps us massively. Our marketing and insight teams use a long list of data to help find the best policies for our users and it helps us really understand each market well.”
Pier Insurance focuses its routes on more bespoke products, alongside the standard off the shelf variants. Gordon adds: “It’s alright to have off the shelf products. We do sell them but some of our partners want a more personalised touch. We work with an MVNO where one of their customers wants their phone with them at all time.
“We’ve tailored their insurance policy where if anything goes wrong with their device, we send a team straight out to them to fix their problems. I’d say we’re one of the top three mobile insurance providers in the country and we’re really adding personal touch that helps set us apart.
Opportunities for the future
So what’s in store for the future of mobile insurance? The Internet of Things (IoT) is expected to be the next major driver to its success. Mobiles won’t just be used for gaming, photographs, messaging or file storage. They’ll be used to control many important aspects of our lives, such as the heating in our homes or the cars in our garage.
According to IDC, the IoT market is expected to grow to £1.3 trillion by the end of this decade – up from £525 billion. The analyst claims that mobile devices will make up more than 60 per cent of this growth. Services – activating the heating or security systems from your handset – will also capture a large per cent of the overall market.
Supercover’s Fannon agrees it is a trend where mobile insurance will very much play a huge role in. “There’ll certainly be plenty of things like IoT driving mobile insurance. We look outside of just tablets and smartphones as a mobile insurer,” he says.
“A lot of our customer use connected devices such as cameras and wearables like the Apple Watch. The trends we’re seeing suggest IoT will certainly help drive the market.”
Protect Your Bubble’s Basinger says: “The number of connected devices is on a considerable increase [and] there’s an opportunity for insurers to make it work for them. The innovation around IoT must not be ignored and it’s one that providers can certainly make work for them.”
Assurant’s Morris adds: “The Internet of Things is changing the way we think about our daily routines. The most mundane tasks are now connected to complex devices and systems.
“Protection and services that are easy to purchase and easy to use mean your subscribers can enjoy the benefits of a connected lifestyle worry-free, while delivering increased revenue and brand loyalty.”