NEW ZEALAND INSURANCE COMPANIES CONCERNED OVER THEFT INCREASE IN DIGITAL WORLDSTUFF : TECHNOLOGY : DIGITAL LIVING - STORY : New Zealand's leading news and information websiteInsurers fret over gadgets
22 August 2005
By REUBEN SCHWARZ

The rising popularity of high-priced cellphones, notebook computers and MP3 players is starting to hit the hip pocket of insurance firms, which are now forking out millions of dollars for lost and broken gadgets.

Tower senior technical manager for general insurance Allan Black says the firm deals with many of these claims which are increasing in volume and value daily.

He says Tower pays out "in excess of $750,000 per annum and rising" in claims for portable electronics.

Alan Perry, executive manager of AMI, says there has been a substantial increase in the number of claims for cellphones and their cost.

More New Zealanders than ever carry high value electronics.

The number of cellphones has doubled in the past five years and more than 260,000 notebooks were sold in 2003 and 2004.

The number of mp3 players nearly doubled last year, rising to 217,000.

About 1600 mobiles are reported lost or stolen every month in New Zealand, according to figures from Telecom and Vodafone.

Assuming an average price of $250 per phone, this tallies to $4.8 million in lost and stolen cellphones every year.

Some of the phones reported as lost or stolen will be found or recovered.

While claims for cellphones and other portable electronics are unlikely to trigger rises in insurance premiums on their own, Mr Black says they would be considered when premiums are set.

"Any increase in our claims spend is a worry and in due course would be reflected in our premiums," he says.

Mr Perry says many school-aged children and teenagers now have cellphones, adding to the insurance risk. Another concern with cellphones is that the electronics can fail and they can just stop working without being damaged.

Some unscrupulous people then damage their phones on purpose to claim insurance for a replacement. Others intentionally damage working mobiles to pay for an upgrade.

"People want to move from one type of phone to a later model and attempt to do so via their insurance policy," says Mr Perry.

IAG, which owns State and NZI, isn't concerned the loss and theft of portable electronics will drive up its premiums.

"We don't see any trends that point towards premium adjustments," says spokeswoman Adrienne Collins. "This is because the technology remains relatively inexpensive to replace."

Handheld electronics and computers are covered under IAG's standard home contents policy, as long as customers take reasonable care to avoid breakage, loss and theft.

Tower will replace electronic equipment that is less than a year old, generally with products sourced through preferred suppliers at discounted prices.

AMI's policies vary from replacement with no time limits to paying the purchase cost minus depreciation.

If computers are less than five years old IAG pays out the replacement value, otherwise it will pay only their market value.

"Replacement" for IAG means replacing the item with one of equivalent capability and quality. So for a two-year-old mobile, the replacement value will be much less than what was paid two years ago.