India's smartphone insurance market to reach $500M by 2025: RedSeer
India's smartphone insurance market is expected to grow at a CAGR of 29 percent to touch $500 million (about Rs 3,678 crore) by 2025, according to a report by consulting firm RedSeer.
The report noted that smartphone insurance products, which protect smartphone owners from the burden of extra costs like accidental damage and screen damage, have gained popularity in the market over the last few years.
These products are offered as an optional add-on while purchasing a new smartphone at the point of sale, or customers can buy the same separately as well from the various smartphone insurance providers.
"India's smartphone insurance market of about $140 million (about Rs 1,030 crore) is expected to grow over 3.5x to reach about $500 million by 2025 a CAGR of about 29 percent," it said.
The smartphone user base is expected to reach close to one billion, at a run rate of about 78 million new users being added per year by the end of 2025, it added.
"This certainly presents a great opportunity for the smartphone insurance market to grow as most smartphone users (as per the RedSeer study) realise the need of owning a smartphone insurance cover, and more than 50 percent of them are willing to purchase one," it said.
Moreover, supply side drivers are going to further push the market in the right direction, with organised smartphone sales channels expected to drive significant growth for the insurance product, the report added.
"Smartphone insurance is truly evolving as a great opportunity for the Indian general insurance industry, with India on the path to become the largest smartphone market in the world, and the customer getting increasingly aware of the benefits of owning a smartphone insurance," RedSeer Consulting Head India Consulting Abhishek Chauhan said.
He added that regulatory intervention and clarity is really important to ensure success of this industry, as it would bring in consistencies in customer experience, and drive increased satisfaction that at times has been a challenge in this market.
"Protecting customers' interest is critical to ensure growth," he said.
In India, all insurance products related to life, motor, health, among others, are strictly governed by the regulator, Insurance Regulatory and Development Authority of India (IRDAI).
IRDAI has clearly defined guidelines and regulations for the insurance industry, and it oversees licensing and operations of all players in the industry such as insurance companies, distribution intermediaries, third party administrators, RedSeer said.
"Smartphone insurance, being a slightly nascent category, still seeks more clarity from the regulator to ensure consistent and satisfactory customer experience. Several players selling smartphone insurance products in the market are not operating fully under the purview of the regulator, which has led to multiple incidents of customer complaints as well as few players going out of business," RedSeer added.
The report said some of these unlicensed players that are operating as quasi-insurers while offering smartphone insurance have found support from various investors indicating a lack of awareness in the risks associated with such models.
While licensed insurance companies have entered this space in recent years, several strong smartphone distribution channel players and original equipment manufacturers (OEMs) have partnered with unlicensed players leading to several disadvantages to the consumer, it added.
"Meanwhile, in the absence of a regulatory framework, such partnerships are fraught with default risk that would be a blow to both consumer confidence and the brand's reputation," it further said.
According to the report, it is becoming increasingly important for the regulator to intervene to ensure protection of customers' interest, which is a critical requirement for the sustainable growth of this segment.
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.