While other insurers reinvent themselves for the digital age, mobile device insurance is lagging and must keep pace. EIP CEO Ross Sinclair believes it’s time to rethink how the mobile device insurance market operates.
The mobile phone industry is buzzing. Consumers are attached to their mobile devices more than ever before – more so after the Covid-19 pandemic. However, mobile devices are becoming increasingly expensive and device screens are getting larger, making repairs more costly. As a result, the insurance premiums to protect these devices are increasing proportionately and reaching the point of becoming prohibitive to consumers.
With their high use and propensity to damage, it’s surprising that mobile device insurance is behind other areas of the insurance industry. Now is the time that smartphones deserve smart insurance. EIP’s own data shows that more than 90% of device insurance claims are for accidental damage, due to large glass screens and extensive use. However, as EIP CEO Ross Sinclair explains, “Mobile device insurance claims are relatively simple, but the claims process, lacks efficiency.” The future for the sector, he said, is through usage-based insurance and personalised policies, priced on a customer’s specific profile. By leveraging a more personalised pricing approach, insurers gain not only much more stability of margins, but significantly increased profitability – and some of these profits can be reinvested in a softer and more efficient claims approaches.
It is important to understand a customers’ profile during the risk assessment and according to Sinclair, although the handset is a factor to risk, the biggest risk factor is the user of the device. “Our industry uses a ‘one price fits all approach which assumes that more expensive handsets are a higher risk than cheaper ones, but this is wildly inaccurate as the device price is not a risk factor,” he said. “A little old lady presents a very different risk of damaging her phone than a 22-year-old scaffolder – but until today no-one was taking that into account.”
Is device insurance pricing stuck in the past?
Of course, devices and their functionality have changed beyond recognition, but the insurance products that protect them have refused to evolve at the same pace. The failure to adapt could be a
contributor to the decline in mobile insurance sales, Sinclair said. There are several contributing factors in this shift in focus away from device insurance but price is a major component, it is not unusual to see insurance premiums for a mobile of between €15 to €20 per month, which can be discouraging for many customers. Sinclair added, “Insurers constantly walk an underwriting tightrope where prices need to be maintained at a level to attract a broad range of customers, rather than pricing for just those who are higher risk and would therefore incur higher claims levels,” Sinclair said.
Consequently, more intelligent pricing of these risks is the need of the hour, in order to maintain a balanced book of business and attract low risk customers with preferential pricing.
A solution for many InsurTechs is to make insurance pricing much more sophisticated. Sinclair added that mobile technology allows insurers to understand end-users’ activity in real-time and correlate this against claims data to build a much deeper picture of risk. “Think telematics in the motor insurance industry, where the ‘black box’ in the car tracks how, when and where the insured is driving and allows the insurer to price according to the specific customer risk,” he explained. “A few years ago, it would have been unthinkable – and technologically impossible – for customers to offer up this level of sensitive data to an insurer, but the culture is changing and the savings can be compelling, so we’re seeing the telematics industry growing by 20% per year.”
How EIP is flying the flag in mobile device insurance
Mobile device insurance providers need to increasingly focus on delivering the right claims experience – and the insurance experience as a whole. As Sinclair detailed, the focus must be on simple management of policies, easy ways to update details and make claims, and faster claims handling, decisions and payouts. This is what EIP aims to do. Its tools enables insurers, mobile operators, banks, retailers and others to offer subscription-based insurance products to their customers much more quickly, efficiently and cost effectively.
EIP has developed contextual pricing based upon a number of metrics surrounding the customer, such as age, location, gender, occupation and more. This contextual pricing uses up-to-the-minute claims data to deliver a unique price for each customer. By adopting this methodology, insurers can increase profitability of a given program by up to 40%, Sinclair claims.
On the claims side, one of EIP’s offerings, Autoclaim, uses the gyroscope and accelerometers within a mobile device to detect when it has been dropped and it then passes that information to the core system which automatically creates a draft claim. It then checks with the customer if they need to make a claim and if they confirm ‘yes’, the claim is submitted. The whole process takes less than ten seconds and two button presses.
Current state of the mobile insurance industry
While the industry at large is dragging its feet, mobile device insurance providers are slowly changing their strategies.
Looking forward, according to Sinclair, “It is clear that there will be renewed interest in mobile device insurance soon, with InsurTechs beginning to enter the market to offer companies more innovative ways of providing protection for mobile devices and other subscription insurances.” Indeed it’s easy to see how a slew of very clever insurance technology startups such as EIP are mushrooming and scaling up across the world. The global mobile phone insurance market which was estimated to be worth $20bn in 2019, is expected to grow at a CAGR of approximately 11.5% accounting for more than $76bn in 2030, according to data from Allied Market Research.
To stay in business, companies need to adopt these InsurTech tools and design the products and processes from the customer up rather than the insurer down. He concluded, “Those insurers who partner with the smartest InsurTech will likely flourish and those who don’t will likely be swallowed up or even disappear completely.
This article was originally featured in the 2021 InsurTech 100 list. The InsurTech100 is an annual list of the most influential global InsurTech brands. It recognises the next generation of InsurTech solution providers who are shaping the future of the Insurance industry. EIP are once again excited to be recognised amongst the worlds most exciting InsurTech companies in the Insurance industry for 2021.
EIP Limited a provider of white-labelled Insurtech software and a plug and play digital market place to enable leading corporates to offer insurance and subscription products to their end customers. EIP’s marketing-leading InsurTech software solutions enables subscription-based insurance providers to reduce costs, maximise profits and upgrade their digital customer experience.
Despite my creaking joints and involuntary grunts when I get up from the sofa, I don’t consider myself especially old, but in tech terms, I’m a fossil. In the 23 years that I’ve been in the mobile device insurance industry, technology has enhanced beyond anything we could have conceived of in the early 90’s. I sadly, have not.
The evolution of technology and its impact on device insurance risk factors, is important
I find myself occasionally reminiscing with friends or colleagues about the early days of mobile phone tech – a bit like when you discuss the sweets that were available as a kid (they were definitely much bigger back then!) or the TV programs that we used to watch as kids.
‘I remember the days before SMS’, I’ll declare knowingly to some young ‘whipper-snapper’, sounding a bit like one of the Four Yorkshiremen from the Monty Python sketch. The ability to send an SMS commercially, first arrived on UK mobile phones in 1998 and I recall a very senior director of a former employer of mine (a major mobile carphone retailer) saying that SMS ‘would never catch on’. Three years later, 18 billion SMS messages were sent and as early as 2000 you could already pay for your parking in the Baltic States by SMS.
There were battery conditioners (anyone remember those?), phones with external antennae (Ericsson’s looked cool, like a sharks fin) and the only game you could play on your phone was ‘Snake’. Then came colour screens (1998, Siemens S10), the first camera phones (2000), then ‘smartphones’ started to appear like the Ericsson R380 and the Nokia Communicator. The first smartphone that really flew off the shelves was the Nokia N95 which was released in 2006, with over 7 million sales in 12 months. It was however launched just one year before the release of the first Apple iPhone which killed it stone dead, and henceforth started what would become the eventual demise of Nokia. Despite the iPhone’s lower specs, the iOS software was far more intuitive and user friendly than Nokia’s Symbian platform. And, when in 2008, Apple brought us the App Store the game changed again and what you could do on your mobile phone went up a few gears more.
So why do I wander, misty-eyed, through the history of mobile tech? Well, I’m in the business of mobile device insurance risk (or at least the software that manages it), so the evolution of technology and its impact on the risk factors associated with the device is important, and actually quite interesting.
Device metrics can be an indicator of where there may be higher risk
As a business, EIP Ltd continuously mines vast reserves of mobile device insurance claims data to determine what device (as well as human) characteristics are indicators of higher or lower risk. Some indicators are obvious, such as where the customer lives or the screen size of the device they own, but others are less so. For example, did you know that the memory size of a mobile phone materially affects how likely it is for a customer to make an mobile device insurance claim? Or, how often and when a customer recharges their phone can actually indicate how likely they are to claim? Interesting, yes?
At first glance, metrics like these may seem unconnected to risk. But, with a bit more consideration, it’s reasonable to assume that customers who use their phones more, to take photos or play music for example, will gravitate towards devices with higher memory. And, because therefore they will take their devices out of their pockets more, so too increases the likeliness of damage. As such, the memory of the device doesn’t, of itself, affect the risk, but it’s a strong indicator of where there may be higher risk. Logical? Similarly, customers who recharge their phones with a predictable pattern (every evening for example), rather than regularly allowing them to run dead, are more likely to be lower users and therefore lower risk. Would you like to guess whether customers who have a pink phone are a higher or lower risk than those with black phones?
The market maturity of a device also influences risk, but perhaps not as you’d expect
Another interesting anomaly in claims is that for many devices, the risk of damage or loss actually increases significantly the longer the device has been available for sale on the market. This seems counter-intuitive doesn’t it? You might expect (say) the iPhone 12 to be a higher risk immediately after its release, but actually the data on this is clear, the risk of a claim actually increases the longer the device has been in the market. One possibility is that this increase in risk is down to the difference in the type of customer who buys an established model versus those who buy a new-to-market device. Why is this important? Well, because traditional mobile device insurance pricing for new devices is simply based upon a combination of the device cost and existing claims rates. It does not take account of predictable changes in those claims frequency rates over time, which will require higher premiums.
EIP’s powerful pricing engine, takes into account all these metrics and more
Our company, EIP Limited, a Global #Insurtech100 company, has developed a powerful algorithm which, through our pricing engine, takes into account all of these metrics, in real time, to provide mobile device insurance quotations. A market first and meaning we can not only ensure that insurance margin is always preserved for our clients, but we can also offer customers more personalised insurance quotes based upon a better understanding of the risk profile of the device they own, and their individual behaviours.
Wherever technology goes next, we’ll be analysing the data
Who knows where the technology will go next? Significant advances in technology seem to have plateaued a bit over recent years, with new developments being more evolution than revolution – with the possible exception of folding phones which have yet to find mainstream appeal, however the same was the case with big screen phones which took time to catch on. Whatever new features arrive in months and years to come, we’ll be correlating these features to the risk factors, to further refine and sophisticate our pricing model.
In the meantime, if my aging knees allow me to get off the sofa, I’m off to find someone to bore about the days before mobile phones had SIM cards, when ‘Motorola’ ruled the world and how we all, somehow managed to get around without Google Maps!
If you want to know more about EIP’s pricing solutions and how we’re leading the change, please get in touch with the EIP team.
Author: Ross Sinclair (CEO and Founder of EIP Ltd)
EIP is a market-leading global InsurTech business that delivers digital insurance solutions to Telecoms, Banking and Lifestyle insurance providers. We’re an #InsurTech100 company trusted by some of the world’s biggest brands. Learn about EIP and how our end-to-end solutions can transform your scheme management and claims experience.
As the eerie quiet of lockdown rolled across our cities and towns, our devices lit up. In the UK, we watched ‘Whitty’, subscribed to steaming services, binged box-sets, jumped around with Joe and rediscovered how it really is ‘good to talk’.
Has the lockdown changed customer attitudes towards mobile device insurance?
Mobiles, tablets and laptops were central to remote working, home-schooling, online-gaming, house-partying and quizzing. They were lifelines to our loved ones, long-distance relationships and long-lost friendships. As we stayed home and stayed connected, the networks saw data usage surge (by 11GB per person a month on average), and figures from Ofcom show the average phone call rose from 3 mins 40 secs before lockdown to 5 mins 30 secs by the end of it.
But did this increased dependence shift our attitudes towards protecting our mobile devices? Or could mobile device insurance become another casualty of lockdown? What do providers need to consider as we move towards a new normal?
Demand for mobile device insurance will quickly return
Whilst claim statistics show that drops, knocks and spills are less likely to happen at home than on the move, they still put a lot of smartphones out of action through lockdown. Loss and theft reduced significantly through the pandemic, but we can expect these risks to rise again as travel restrictions ease.
Our increased reliance on mobile devices is likely to drive strong demand for protection against the cost of repair and replacement. But, with more pressure on household budgets than ever before, value for money is going to come under a keener lens and mobile insurance will need to deliver on its digital promise and keep pace with the requirement from consumers to be always-connected.
To date, the traditional offering has changed little but the explosion in business and consumer connectivity opens the field for the disruptive effort of InsurTech. New technologies will start to play out in the mobile insurance market. AI and machine learning will help shape risk premiums and drive changes in pricing and cover, and devices themselves will be able to detect when they’re damaged trigger a claim.
Customers will no longer accept the slow, cumbersome experiences of before
As we emerge from lockdown and start to shape the new normal, all generations have embraced and adopted digital services at an unprecedented pace. Immediacy will be a non-negotiable demand; people will expect slick processes, a straightforward experience and real-time resolution. Claim forms, call-backs and lengthy repair cycles won’t cut it. To delight customers in this internet-enabled everything, post-Covid climate, insurers need to speed up the customer-facing processes, work and think digitally. Intelligent analytics will drive personalised insurance cover, protect against fraudulent claims and enable fair, risk-based premiums at point of sale AND beyond as a customers’ risk profile develops.
The global phone insurance market was worth US$27bn in 2020 and analysts forecast strong growth in the next five years. InsurTechs are going to set the pace of change in this industry. Consumers want fast, simple, and inexpensive. They’ll get it. Loyalty may play a less substantial role in customers’ decision making with the move to an online marketplace but innovation and reputation will hold customers attention. As data enables innovation around customized solutions and frictionless service solutions, tech will become a key differentiator. People will lose patience with call-waiting times and switch to top-notch technology-driven experiences. Put simply, we’ve developed a digital independence during lockdown. And companies need to #getwiththeprogramme.
If you want to know more about EIP’s digital insurance solutions get in touch with the EIP team. See how our innovative software, powered by automation, is transforming the insurance experience.
Author: Esther Connock (Business Development at EIP Ltd.)
EIP is a market-leading global InsurTech business that delivers digital insurance solutions to Telecoms, Banking and Lifestyle insurance providers. We’re an InsurTech100 company trusted by some of the world’s biggest brands. Learn about EIP and how our end-to-end solutions can transform your scheme management and claims experience.