Asurion Handset Insurance and Maryland Settlement

Implications: Asurion and handset insurance could be impacted by these industry changes: 1) How handset insurance is sold; 2) Consumer Disclosures; 2) Fulfillment of claims; 3) Acceptance Rate.

Analysis: The settlement of Maryland’s Attorney General with Asurion about mobile handset insurance could affect not only how the insurance is sold, but also the consumer demand as handsets become multi-functional devices.  The Maryland settlement has implications for the class action suits across the country about replacement by courier-delivery and with refurbished handsets.  Carrier stores and Asurion are being required to be more diligent in presenting the insurance conditions and gaining the customer’s acceptance by signature.  Both call centers and store locations will have to be able to instruct the customer about the insurance conditions, and not just imply that insurance is included.  The impact might affect the consumer acceptance or attachment rate for insurance as they realize that the handset will not be replaced in an actual store.  Also, the consumer buying a higher-end smartphone might doubt the quality of a refurbished handset.  And the settlement’s guidelines to allow the right to cancel could lower the attachment rate by consumers.
As the mobile lifestyle becomes more diverse, handsets have a shorter life cycle with the consumer updating to a more innovative device rather than wanting a replacement.  Asurion entered the handset insurance business in 2006 by acquiring Lock/line.  Lock/line fulfilled replacement claims through a logistics contract with Cellstar.  Asurion terminated Cellstar and established its own fulfillment for insurance claims.  The supply chain distributor, Brightpoint, acquired CellStar.  Asurion’s challenge is if it needs an alliance with a distributor of a wide range of devices such as Brightpoint that has contracts with Nokia, Motorola, HTC and ZTE.
During the start-up of wireless, insurers like Signal Holdings of Assurant had the advantage of fewer handsets and longer product life spans.  Mature markets have a large variety of mobile devices as technology evolves and users wear out the handset.  In addition, the carriers are focusing on more expansive retail stores to serve the customer such as AT&T’s Experience Store or Verizon’s Evolution.  The expanded retailing could mean that the carriers regard handset replacement as store traffic to cross-sell new mobile applications.  Asurion faces a challenge both from future consumer needs and mobile retailing.