India | ME | SEA Access My Account  

Jan, 2021     

Inside $500M Indian Smartphone Insurance market

~557 Mn people in India have access to a smart-phone by 2020 which would go up to ~939 Mn by 2025.


Although in the new Internet-age, a number of sectors have come to the limelights over the years, a few things always remain constant for any sector to flourish. While we are immensely maturing digitally, smartphones remain a constant for this growth.

At this juncture, we see that a number of critical things are now attached along with the rise of smartphones which has become the need of the hour and needs critical attention. One among these crucial elements is the Smartphone Insurance Market. Here is an overall understanding about this nascent market.

1. The Smartphone insurance market is expected to grow multi-fold driven by strong demand and supply tailwinds…

Driven by increasing penetration of smartphones and positive growth outlook, it is estimated that ~939 Million individuals will have a smartphone by 2025. The existing trend promises a huge growth potential for the Smartphone Insurance Market. The above macro trends coupled with high need realisation and increasing competition for Smartphone Insurance sets the stage for the next wave of growth for this sector.

Demand Drivers

  • ~557 Mn people in India have access to a smart-phone by 2020 which would go up to ~939 Mn by 2025.
  • Smartphone market is set to grow with 153 Mn shipments in 2020 to 300 Mn shipments in 2025.
  • High need realisation (~73%) and willingness to purchase (~53%) Smartphone damage insurance plans.

Supply Drivers

  • Increasing number of players and competition in the market.
  • Wide variety of offerings at different price points.
  • Shift to Organized Retail channels leading to higher attach rates from the channel, with Consumers relying on retailers for purchase decisions.

2. Indian Smartphone Damage Insurance market expected to reach ~$500 Mn by FY 25

Smartphone Insurance sales were ~$140 million in FY 20 – with LFR channel driving the bulk of sales. With continued premiumisation, and shift towards organised channels (that have higher attach rates), the market is set to reach ~$500 million by FY 25.

3. This market is divided into 2 set of players – Licensed Insurers and 3rd Party Service Providers

Types of Players and Channels in Mobile Damage Insurance Retail

Note(s): Selected player logos have been used here. The list is not exhaustive

The Smartphone Insurance market has witnessed entry of multiple players providing a wide variety of offerings. Licensed (Full Stack) Insurers and 3rd Party Service Providers are the two key types of players in this space. Looking at 4 key parameters including Prudent Risk Management – Financial provisioning, Transparency in Product Pricing, End to End Claims Management, and Structured Grievance Redressal Mechanisms to evaluate business models, it appears that Licensed (Full Stack) players are better positioned to protect consumer’s interest, as they are governed by regulations. 

4. The market needs better Regulatory framework to grow

Recommendations to Key Smartphone Insurance Ecosystem Players

Consequently, Regulatory intervention is a must to define the rules for 3rd Party Service Providers and the ecosystem must prioritise regulatory compliant Smartphone Damage Insurance providers to ensure consumer protection. Regulatory intervention will ensure clear support for consumer interest through Prudent risk management, Transparency in product pricing, End to end claim support to the customer and Structured grievance handling mechanism.

Regulators

  • Need to regulate commissions to increase price transparency and avoid price gauging by intermediaries.
  • Safeguard policyholder’s interest through ascertaining who qualifies as a player in the market and establish clear accountability.
  • Define the rules for 3rd Party Service Providers by defining their role as facilitators (similar to health and other non-life insurance), who do not play a part with underwriting risks, to maintain prudent market conditions.

Channel Partners

  • Substantial opportunity exists in the market. Working with Licensed (Full Stack) Insurers can help accelerate Consumer loyalty.
  • Reputation risk at stake if one continues to operate with unlicensed, unregulated (non-IRDAI registered) players.
  • Decrease likelihood of Consumer backlash as awareness on risks associated with 3rd party players advances, best to join hands with Licensed (Full Stack) Insurers.

Investors

  • The report suggests to be mindful of various business models present in the market and perform due diligence optimally, keeping the regulatory compliance and Consumer satisfaction in mind.
  • Be wary of underlying penalties associated with operating un-regulated Insurance businesses.

Consumers

  • Be wary of nature of company, pricing, underlying insurer and grievance redressal mechanism.
  • Be watchful of the product costs while buying plans, believing it to be an insurance product, as it may not be the case at all times.