A very interesting article has been posted by Warranty Week, about the market for product protection plans (aka extended warranties) in the USA. Despite the urgings of so-called watchdogs, the adoption of these insurance packages for smartphones is growing at a tremendous rate.
Warranty Week expects the protection plan market in the USA to be worth about $39.5 billion this year. Note that this covers the vehicle service contract; home warranty; retail brown and white goods; and mobile phone insurance segments, not products like jewellery or furniture.
Since a dip in 2009, protection plan uptake has been growing in all segments, but none more so than mobile phone insurance. There are three different ways to ensure a phone in the USA: through the phone network; through the retailer; or (with an iPhone or iPad) through AppleCare. AppleCare and retailers’ protection plans will represent about $2.3 billion each this year. Phone network plans are more popular, as they cover loss and theft in addition to damage, defect and malfunction (although some retailers are now also offering these types of protection). Warranty Week predicts that these plans will be worth $8.6 billion in 2014.
The above figures mean that a single product – the smartphone – will represent about 34% of the service contract market in the USA this year. That is almost equal to vehicle service contracts, which have held steady at around a 40% share for several years.
The data points to the conclusion that smartphones and passenger cars are the only products worth insuring, as everything else is seen as disposable and replaceable. ‘Smartphones are perceived to be expensive, sophisticated, and very fragile, like an antique porcelain tea cup from the Ming dynasty. It’s the perfect storm of peril versus peace of mind’, writes Warranty Week.