Insurance companies such as Asurion, Assurant, Likewize, and SquareTrade are increasingly shaping the circular economy in the mobile and consumer electronics sectors. While their core function remains protection, these companies are expanding their value chains to include trade-in, buy-back, and, in some cases, repair services. Their involvement is crucial in extending the lifecycle of devices and facilitating the reuse of spare parts, a critical component of sustainable business practices. Stuart Blackhurst’s Finsur did an in-depth review and analysis of latest insurance developments.
Captive insurance models providing transparency
A handful of carrier-owned captive insurance companies, like those owned by Vodafone and Telefonica, offer valuable insights into the performance of the mobile protection industry. These captives, being regulated entities, provide detailed data on premiums, claims, and overall financial health, which can guide strategic decisions across the broader market. Telefonica Insurance, for example, regularly publishes its annual accounts and Solvency and Financial Condition Reports (SFCR), offering a wealth of performance metrics for analysis.
Steady premium performance over recent years
Telefonica Insurance has seen relatively steady premiums in recent years, with a 4.3% increase from €154m in 2022 to €161m in 2023. This growth comes after a slight dip between 2021 and 2022. The UK continues to contribute the largest share, with approximately 64% of premiums, while other markets like Germany and Spain follow at 18% and 12%, respectively. Despite some fluctuations, the overall trend indicates a resilient market for mobile insurance.
Claims experience and loss ratios
In terms of claims, Telefonica Insurance experienced a surprising reduction in claims costs, despite expectations of a post-pandemic spike. Claims costs increased by only 3.2% from €48.8m to €50.3m in 2023, far less than anticipated. This decline is likely tied to shifts in consumer behavior, with remote working and reduced device usage impacting the frequency of claims. However, the company’s net loss ratio rose due to changes in reinsurance arrangements, reflecting the evolving risk management strategies.
Operating expenses and profitability trends
While acquisition costs have remained relatively stable, Telefonica Insurance faced a spike in administration expenses in 2022, largely due to an error in regulatory fee calculations. Despite this, profitability has decreased by 57% since 2020, largely driven by increased claims costs, higher operating expenses, and less favorable reinsurance arrangements. This has led to a reduction in reinsurance commissions, further challenging profitability in the sector.
Outlook for the future of mobile insurance
Looking ahead, insurers in the mobile protection space must continue to innovate and adapt. With pressures on premiums, claims costs, and profitability, the emphasis on expanding product offerings and focusing on the circular economy will only grow. Telefonica, for instance, has begun exploring multi-risk home insurance and embedded insurance partnerships, which could be part of a broader strategy to increase their relevance in a competitive market.
Market
Trade-in
Repair
Refurbishing
