Case studies | Video

Business mobile insurance: a total rip-off?

BILLMONITOR | DECEMBER 11, 2017

The price of handsets has increased significantly over the last few years. The iPhone X, for example, is advertised at £999 on the Apple Store. Phones have become high value items for consumers and, in some cases, they are worth insuring on an individual basis. However, the question remains: can the same be said for your business? We don’t think so…

1. How costly is mobile insurance?

The cost of insurance varies wildly, from just 99p to £14.99+ per month. The services provided by the insurance companies can also differ, particularly in terms of speed and ease of replacement when you make a claim. Evidence suggests that quality service and a swift and hassle-free replacement process comes at a price.

2. How easy is it to make a claim?

The better insurance providers will provide you with a hassle-free handset replacement service within 24 hours, whether lost, stolen or damaged. The worst insurance providers will ask you to file a report and send the handsets for technical assessment before a decision is made about whether the claim is to be awarded. This all takes time and doesn’t necessarily come with a guarantee that you will have a new phone at the end of the process. Often these providers will not cover issues like water damage or neglect, which may come as a surprise if you haven't read the small print!

Top tip: Thoroughly review the claims and replacement process before you take out the insurance. Also, shop around.

 

3. Is mobile insurance worth it? A case study of Business X.

(Business X is a real Billmonitor client, and while the numbers are examples, they are proportionally accurate)

Following its 2015 renewal, Business X had over 40 handsets, which is insured at an average of £10.50 per device through its network provider. Most of the handsets were iPhone 5s 16 GB and Business X was paying an average of £252 per connection over a standard 24-month contract. In 2015, a new iPhone 5s 16 GB would have cost around £450, while a like-for-like replacement today costs about £230.

Number of handsets

Monthly insurance premium per handset (avg.)

Total monthly insurance premium

Yearly insurance premium

Total contract insurance premium (24 months)

40

£10.50

£420

£5,040

£10,080

 

While Business X made frequent claims, affecting about 30% of their connections each year, most of the claims were for damaged screens and not lost or stolen handsets. Assuming each claim was a 100% loss, the total costs would have been about £4,080 per year – with Business X paying £5,040 of insurance premium throughout that same period.

The cost of the insurance simply doesn’t add up and it doesn’t make sense to pay more for your premium than you can expect to receive in replacement value – the above example highlights this very clearly.

4. Recommendations

Insurance makes sense for high value and low frequency events, such as your house burning down, because lost, stolen and damaged handsets are a relatively frequent occurrence. The cost of insuring these events is also relatively high.

We believe that mobile insurance makes no business sense and we never recommend it to any of our clients. You should only take out insurance if you cannot finance a replacement handset out of your ordinary cash flow, since insurance will regularly cost you more than the combined value of any claims (otherwise all insurance companies would go bust, paying out more than they earn).

If clients insist on obtaining handset insurance, we always advise them to create a benchmark for the maximum annual insurance premium they should be prepared to pay based on how often they have made a claim in the past and the related costs thereof.

5. An alternative solution: Self-insure!

Rather than pay over the odds to an insurance provider, it makes more sense for businesses to put aside enough money each month to cover the loss of a handset, should that arise. To calculate this, look back at how many handsets you had lost, stolen or damaged over the last year or two, and put this money aside in monthly instalments.https://ssl.gstatic.com/ui/v1/icons/mail/images/cleardot.gif


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See you soon,

Billmonitor team