According to new research issued by financial services market research consultancy Finaccord, the market for extended warranties and insurance related to mobile and non-mobile consumer products in Europe was worth around €5.58 billion [$8 billion] in 2010. This breaks down between €2.55 billion [$3.66 billion] sold to customers buying white, brown and grey goods, and €3.03 billion [$4.74 billion] for policies related to mobile gadgets and telephones.
Within the pan-European total, which includes data for 20 countries, the UK accounts for €1.74 billion [$2.5 billion], which is over 30 percent of the total.
“Sales of extended warranties and insurance linked to these types of consumer product occur mainly through retailers and manufacturers, plus mobile network operators,” Finaccord explained. “Selling this type of insurance can be important to such organizations because it can deliver valuable and relatively high margin ancillary revenue on top of that which they generate from the related electronic products. In fact, the markets for selling the underlying white, brown and grey goods, mobile gadgets and mobile telephones are, typically, fiercely competitive.”
Finaccord forecast that in 2014 “the value of the aggregate market for these types of extended warranty and insurance across the same 20 countries could rise by over one quarter to €7.12 billion [$10.23 billion], breaking out between €2.76 billion [$3.96 billion] due to policies associated with white, brown and grey goods, and €4.35 billion [$6.25 billion] to mobile gadget and telephone insurance.
“As such, at 43.7 percent, the projected increase in the latter segment is expected to be substantially higher than that for the former market (8.3 percent), which is in part but not wholly a consequence of the more rapid growth in the underlying markets for mobile consumer products.
Finaccord Director Alan Leach commented: “Increasing consumer appetite for more expensive portable computers and mobile handsets, the expanding potential to introduce more comprehensive and, therefore, more costly related insurance policies, and the likelihood of higher take-up rates as consumers become more aware of the potential benefits of this form of cover, are all combining to generate growth in the market for extended warranties and insurance linked to mobile consumer products.
“In contrast, the markets for extended warranties and insurance sold in conjunction with non-mobile white, brown and grey goods are more mature and neither prices nor take-up rates are likely to change in most countries.”
The research also noted that, in the UK, the OFT (Office of Fair Trading) announced in April 2011 that it would “conduct a brief, focused market study as part of an investigation into the market for extended warranties and insurance for a broad range of consumer electronics, encompassing traditional classifications of white, brown and grey goods as well as mobile phones, mobile gadgets and other consumer electronics, including gardening appliances.
“Specifically, the study intends to further examine the state of competition for extended warranties and related insurance in the wake of the proposals made by the OFT in 2008 that aimed to open up the market to third parties away from the point of sale.”
At present, the study is awaiting completion, with results expected to be issued at some point later in the summer of 2011. Finaccord said “its recommendations may have a further impact on the market for stand-alone extended warranties and insurance in the UK.”
Leach added: “The evidence of Finaccord’s research is that while the UK is Europe’s largest market for these types of extended warranty and insurance, there are good reasons for this which may assuage the OFT’s fears. These include the facts that cover can be bought from a much wider range of sources in the UK than in most of continental Europe, that policies are typically more comprehensive in the protection that they offer, which may make them more expensive, and that UK consumers benefit from cut-throat competition in the markets for the underlying white, brown and grey goods, and mobile gadgets and mobile telephones.
“In addition, it should also be noted that, with the exception of mobile telephone insurance, Finaccord’s research indicates that overall cross-selling rates for these forms of cover in the UK are not significantly higher than those in comparably sized European countries.”