Regulatory News

Research reveals most consumers do not understand what gadget insurance covers

5 Dec 2017 Press Release

Insurance

  • Most consumers did not plan to buy insurance for gadgets such as smartphones and tablets until it was sold to them as an add-on at the point of sale
  • Majority of consumers did not understand what was covered, while some consumers may be paying for cover they do not need
  • Findings from the research will complement a Central Bank review of firms

The Central Bank has published the research
report Consumer Experience of Purchasing Gadget Insurance, which was
undertaken to
examine consumers’ attitudes, behaviours and experiences when
buying insurance for gadgets such as smartphones and tablets.  The research also sought to understand the
impact of any potential behavioural biases and identify potential risks in this
area.

The
research found that:

  • The majority of consumers did not understand their cover and thought it covered more than it did, and some consumers may be paying for cover they do not need.
  • Most consumers did not plan to buy gadget insurance until it was sold to them as an add-on at the point of sale.
  • A significant majority of participants in the focus groups (who mostly bought in-store) stated that the gadget insurance was sold to them as part of an add-on purchase when buying a gadget, usually a smartphone or a laptop, with most purchases based on verbal explanations of retail staff.
  • Focus group participants often justified their decision to purchase gadget insurance assuming it covered the “basics” such as general repair/replacement and screen fixing at no extra cost.

After
further questioning, few participants seemed familiar with the details of the
exclusions and excess related to the policy. Some deemed certain policy terms
to be unfair such as excess costing more than the repairs, application of
waiting periods, no cover for under 18s and restrictions on the age of the gadget
and the place of purchase. The research also found that participants were
unfamiliar with requirements to report incidents to Gardaí, and requirements to
report such incidents to Gardaí within specified time limits.

The
quantitative survey supported these findings with:

  • 29% reporting unawareness of the requirement to report theft/loss to the Gardaí;
  • 45% expecting ‘wear and tear’ to be covered; and
  • 77% expecting to be offered a new device in the event of a device needing to be replaced.

The
report also highlights that:

  • 12% of the adult population (440,000 consumers) held gadget insurance (at the time of the research) however, as many as 24% were likely to have held it within the past two years;
  • 21% of respondents failed to cancel previous policies after taking out a new policy – in doing so, they were paying for cover they no longer needed.

Findings
from the research are being used to complement a thematic inspection of the
sale of gadget insurance products in relation to product oversight and
governance requirements.
  Findings
of this thematic inspection will be published in 2018.

Director General Financial
Conduct, Derville Rowland, said:

“Having analysed this issue from the consumer perspective, our focus is
now on completing our inspection of firms, and ensuring that the best interests
of consumers are protected.

Given the research also highlighted misunderstanding of policy cover, consumers
who may be considering purchasing gadget insurance over the festive period may
wish to consider the types of exclusions and excesses highlighted in this
research, to see if they are included in their policy, and to determine if the
cover they are offered meets their needs”.

 

ENDS

Notes:

Methodology used

The research comprised of a two-part process
incorporating both qualitative and quantitative research methodologies:

·       Qualitative
research
included eight focus group
discussions (with 6-8 participants in each group) among current and past
holders of gadget insurance.  All focus
group participants had held gadget insurance in the past five years, at least
three held gadget insurance at the time of the focus groups and two or more
have had claims experience of some sort in relation to gadget insurance.

·       Participants represented a cross-section of
age groups, social class backgrounds, regions and phone contract types (i.e.
prepay and bill pay). 

Participants
in three of the focus groups were set pre-research tasks (review sample real
life policy documents) to boost their sensitivity/knowledge of the area.

Behavioural
scenarios were used within focus groups (using real life policy samples) to further
probe consumer understanding of gadget insurance cover and exclusions, how they
responded to a typical sales environment and why they behaved the way they did.

·       Quantitative research included 

o  
An online
interview of 700 consumers who have purchased gadget insurance, from any source (i.e. insurance
firms selling directly to the consumer, retail intermediaries or retailers) in
the past 2 years.

o  
A face-to-face
Barometer survey conducted on a nationally representative sample of adults aged
16 and over to weight results from the online survey.

Behaviours & Attitudes were commissioned to undertake the
fieldwork that supports the findings in this research report.



Background to research

Insurance and
protection risks were identified as a potential consumer protection risk in the
Central Bank’s 2017 Consumer Protection Outlook Report. Firms were reminded of
their responsibility to ensure that information provided to consumers (in
relation to the level of cover an insurance policy provides) is accurate, clear
and easy to understand and that the policy offered is suitable for the
consumer. It is within this context that a thematic review of add-on insurance
products, specifically of gadget insurance, and an analysis of the market and
related key issues, was prioritised by the Central Bank.  This research was undertaken to support this
work.

Current product oversight & governance
requirements

The European
Insurance and Occupational Pensions Authority (
EIOPA) have issued
preparatory guidelines in
advance of the introduction of Product Oversight and Governance (POG)
requirements under the Insurance Distribution Directive.   



Original Article Here

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