Forget your smartphione in train? Forget your phone insurance

 

With even middle-class consumers willing to spend a month's salary on a high-end mobile handset, there is a growing interest in insuring smartphones. However, many consumers are discovering to their chagrin that one of the most common ways of losing the handset—leaving it behind in public transport or a public place—is not covered.

"Our experience is that customers are moving up the value chain and the phone is no longer a mere voice communication device. Close to 55% of customers opt for an extended warranty or insurance protection," said Alok Gupta, CEO of Essar Retail which owns The Mobile Store chain. He adds that since insurance covers are available for as low as Rs 300 for a phone in the Rs 10-15,000 range, most buyers see value in purchasing insurance.

Retail chains such as The Mobile Store and Univercell and other dealerships account for over 90% of the handset insurance bought by individuals.

There is a reason why customers buy insurance at stores—the cover is otherwise not sold by insurers either in their branches or through agents or even online.

With most buyers looking for a replacement in less than two years and the market value of the handsets depreciating rapidly, insurers are worried of what they call a "moral hazard". A moral hazard in insurance is created when a policyholder stands to gain by making a claim. According to Segar Sampathkumar, general manager, New India Assurance, although individual policies are available, over 90% of the business is from group policies sold to dealer and manufacturers. Last year New India issued a group policy to Nokia providing cover to most of the smart phones sold by the company.

Sanjay Datta, head of underwriting and claims at ICICI Lombard General Insurance, says the company does not sell mobile handset insurance to individuals because of moral hazard issues and books the business as a portfolio. But he added that in future the company may look at direct sales. Similarly, another private insurer, Bajaj Allianz General Insurance, sells individual policies only in cases where there is a strong business relationship with the proposer.