Operators turn to handset insurance as VAS

03 Apr 2007

The increasing dependence of people on their mobile phones, and the consequent value that they place on their prized gadget, is creating a lucrative market for handset insurance for cellular operators.

According to a report from research firm Frost & Sullivan, the need to insure their mobile phone has become paramount to customers because the device is becoming more important and indispensable to them.

"Customers want to safeguard the money they have invested in the phone and the valuable information stored in the device," the report said. The introduction of handset insurance presents a good opportunity for operators to offer it as value-added service (VAS), it added.

Handset insurance, the Frost & Sullivan study explained, is giving carriers an avenue to extract profit at a time of declining revenues because voice is turning into a commodity and is being offered with data for a flat monthly fee.

"The challenge for operators is to identify and focus on the most profitable customer segments"&brkbar; Considering how valuable mobiles are to their owners, especially for users in Asia Pacific, it creates an excellent opportunity for operators to develop solutions to address this point," it said.

As a VAS offering, handset insurance can be included in the monthly fee that is added to the phone bill, or can be borne by the operator for special customers. When an insured incident occurs, the handset owner files the claim with the service provider. After verification, the insured person is compensated in the form of cash, repair, or replacement of the mobile.

The report noted that this VAS model has already been successfully implemented in the US and certain countries in Europe, but it is yet to become pervasive in Asia Pacific.

The study reported that several benefits can be gained by operators offering handset insurance. These include the potential reduction of churn, service differentiation, additional revenue stream and support for 3G adoption rates.

"If properly deployed, handset insurance provides end-users the desired assurance and simultaneously helps operators benefit from increased subscriber retention and added revenues," the report concluded.

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