Mobile insurance plans are gaining traction in Asian markets, especially among consumers who own high-end smartphones. Insurance companies may, however, face challenges verifying claims and pricing their insurance plans for mobile devices.
Finnish phonemaker Nokia, for one, partnered with New India Assurance last month to offer Indian consumers with insurance cover against the loss and damage of their handsets. In the Philippines, Sun Cellular linked up with Ace Insurance last June to introduce its mobile insurance plan, called Sun Mobile Shield, for business subscribers to cover the cost of replacing their handsets in case of incidents such as theft.
Insurance company AIG told ZDNet Asia, and people here are increasingly reliant on them not just to communicate but as a means of entertainment, online shopping and financial transactions.
With that in mind, a company spokesperson said most basic mobile insurance plans consist of protection against hardware defects, theft or accidental damage to the user's handset. It may also include coverage for parts, labor costs and repair or replacements costs if the device was lost. The coverage may also be extended to include portable computing devices such as iPads and laptops, she added.
Most mobile phones tend to have only a year of manufacturer's warranty against hardware defects, the spokesperson pointed out. "With the typical two-year mobile contact offered by most telcos, mobile insurance is necessary to provide protection and value-added benefits which give consumers the peace of mind in the event of a loss during that two years," she said.
AIG is already collaborating with three Malaysian telcos--Maxi, Celcom and DiGi--to offer a mandatory Extended Warranty program for iPhone hardware failures. It is also embarking on a more comprehensive product which encompasses theft and accidental damage, the spokesperson shared.
Chew Li-May, associate research director at IDC Financial Insights, agreed that mobile insurance is gaining traction as consumers purchase more costly smartphones such as Apple's iPhone 5 and Samsung's Galaxy S3.
A high incidence rate of users losing their phones and their willingness to pay for the recovery of the device and the information stored on it also mean there is a ready market for such insurance products, Chew stated.
Verification, price planning challenges
The main challenge for insurers and one of the reasons why some may not be particularly keen on offering the service is because it is not easy to verify the "genuineness" of the claim, she pointed out.
The analyst said insurance plans for mobile devices are not new and these products have been tested in India by HTC and LG Electronics as early as 2008, but the phonemakers withdrew their plans due to the high number of false claims and the difficulty in verifying these reports.
The administrative cost would also end up higher than the premiums received by these insurers. For mobile insurance to add to the bottomlines of these insurers, there would need to be sufficient volume to cover the cost, Chew explained.
Insurance companies should thus collaborate more with mobile operators, instead of handset distributors and manufacturers, as telcos will help in verifying subscribers' claims given that their usage can be monitored on the network," she advised.
Mobile insurance plans also need to be very "price sensitive" and pegged to a percentage of handset prices such as 1.25 or 1.5 percent and be valid for a year, in order for the insurers to recover the cost, she added.