Owners Smash iPhones To Get Upgrades, Says Insurance Company 406
markass530 writes "An iPhone insurance carrier says that four in six claims are suspicious, and is worse when a new model appears on the market. 'Supercover Insurance is alleging that many iPhone owners are deliberately smashing their devices and filing false claims in order to upgrade to the latest model. The gadget insurance company told Sky News Sunday that it saw a 50-percent rise in claims during the month Apple launched the latest version, the iPhone 3GS.'"
how is this different (Score:5, Insightful)
It's covered in the contract (Score:5, Insightful)
That's why we buy support contracts. If the phone breaks *for whatever reason*, it will get replaced.
These users are getting what they were promised. That's all.
Insurance Offerings (Score:5, Insightful)
Re:how is this different (Score:2, Insightful)
Because it's an iPhone. You obviously don't understand.
Re:What an eye (Score:3, Insightful)
Re:how is this different (Score:3, Insightful)
There may be some legitimate reasons for claims to rise in the period just after a new model is introduced; e.g., some people tolerate hardware flakiness until there's a good reason to bother with the pain of upgrading. With my sample size of 1 (me), the scroll ball on my BlackBerry refuses to go up sometimes (maybe about 0.1% of the time), but I can wait until my contract is up (or maybe even a new model is out) before replacing it.
Re:Insurance Offerings (Score:5, Insightful)
When a company offers insurance on a product where they will replace it for any reason, why do they expect anything else?
You're assuming the insurance company's claim that it "looks suspicious" is true.
We're talking about an insurance company here - insurance companies will do and say anything and everything to get out of paying a claim.
I think the insurance company in this case is making suspicious claims. They're basically questioning Apple owners who make claims and implying that they're dishonest.
I think it's the other way around.
Isn't knowledge of this included in the premium? (Score:4, Insightful)
What do they expect?
The insurance companies need to stop their bitching.
Re:It's Even More Explicit Than That (Score:5, Insightful)
When you buy insurance(either with a lump sum payment at point of sale, or with monthly premiums), the insurer is already as well off as they will ever be, with respect to you. Up until that moment, you were a customer now you are just a cost center. Now, in the real world, regardless of legal obligations, appeals to ethics, or fancy economic analysis from the IT department claiming that they actually save the company money, cost centers have a way of getting the bare minimum, and that grudgingly.
In a theoretical highly competitive(and ideally liquid) insurance market(and, of course, assuming near-perfect information), competition would help keep this in check. If you didn't treat your cost centers well enough, you'd have fewer customers in the future. Unfortunately, gadget insurance isn't all that competitive or liquid(it is generally bundled by the seller at the point of sale, and the primary competitor is "no insurance at all" rather than a selection of other insurance options, and it is generally either a lump sum or part of a carrier contract, so you can't really switch providers).
The ability to pool risk is really nice. However, the "customer/cost center" problem largely ensures that the insurance experience will be shit. They already have your money, you just have a conditional-IOU, and every dollar they can weasel out of is a dollar they get to keep.
Typical insurance company (Score:5, Insightful)
As far as I can tell this is standard operating procedure for insurance companies.
They'll happily take your money in exchange for 'insurance' for X. They get your money, you get peace of mind, it's all hearts and flowers.
It's just that if at some point you want them to follow through on their end of the deal... Well, then you're obviously a cheating, swindling bastard bilking them out of their money. Any excuse to deny a claim; if they can't manage that often enough they'll lobby for changes in laws to make it easier to do in the future.
The nerve of some people, expecting insurance companies to pay up when they make a claim.
Moral hazard is part of the insurance business- hire some people who are better at math so you can price your insurance product accordingly.
Re:how is this different (Score:5, Insightful)
I also wonder: how many people have malfunctioning cellphones that should be replaced under either warranty or insurance, but are tired of arguing with the warranty or insurance companies -- so they physically destroy the device, and then there's no argument about whether or not it is in need of replacement.
Re:Insurance Offerings (Score:3, Insightful)
Deliberate destruction of property to collect insurance is called "insurance fraud" and is illegal, no matter how cool someone thinks it is to stick it to the man.
Re:how is this different (Score:2, Insightful)
It seems to me the fraud cuts both ways.
Supercover says that these false claims are usually quite easy to spot.
It said: "iPhones, like most mobile phones, are actually very difficult to damage.
Or to paraphrase, "We sell insurance at rates that would allow us to replace 1/2 of the customers' phones even though the actuarial tables say only 1/20 should actually have the need. Thank goodness we can arbitrarily deny a claim."
Re:It's covered in the contract (Score:5, Insightful)
Most insurance companies do offer that. If you smash your 1995 Lexus they don't buy you a 2010 Lexus. Is this insurance company dumb enough to be giving these people brand new models? If so, do they offer car insurance?
FTA:
"Korina said that one device was even dropped on the pavement and then run over by a car."
Wow a phone that was dropped and run over?? Geez that's very suspicious! It's physically impossible to run over a phone with a vehicle...
Re:It's Even More Explicit Than That (Score:2, Insightful)
Seriously?
If you go into a store, give them money for a product, and they start treating you poorly, you can demand your money back and walk out. You can't do that with an insurance company, specifically because of the timing.
Re:It's Even More Explicit Than That (Score:5, Insightful)
There is a more or less fundamental problem with insurance, that is ever pushing against your ever getting customer service(which is a pity; because insurance can theoretically serve a very useful function).
When you buy insurance(either with a lump sum payment at point of sale, or with monthly premiums), the insurer is already as well off as they will ever be, with respect to you. Up until that moment, you were a customer now you are just a cost center. Now, in the real world, regardless of legal obligations, appeals to ethics, or fancy economic analysis from the IT department claiming that they actually save the company money, cost centers have a way of getting the bare minimum, and that grudgingly.
Insurance companies figured out hundreds of years ago that they needed to make sure the insurer had a definite self-interest in the preservation of the asset being insured. If not, I could take out insurance on someone else's ship and sink it, pocketing the full payout. Likewise, I would have no incentive to preserve a ship if it were a leaky wreck when I bought it and my intention was all along to sink it for the insurance money. Things become murkier for the investigator when I did indeed buy the ship for a legitimate business and circumstances turned against me. I could then try to sink the ship for the insurance money if I'd make more on the payout than selling it.
I think gadget insurance is pretty crazy to begin with. Insuring cars, yes, especially gap insurance. Nothing sucks more than crashing a two year old car and realizing you have to finish off payments for it plus the replacement. Insuring your house makes sense. And few people are going to burn down a house with all the valuables inside just for the payout. But an interesting point for fraud investigators, if someone is claiming the house as a primary domicile and it burns down without valuables and irreplaceable personal possessions inside, that's a big warning sign for fraud.
The sad thing is that you may have to buy insurance on products these days simply because they're made so poorly. Among coworkers and friends, there are so many stories of netbooks and laptops crapping out, especially HP's. If a $400 device won't even last you a year, maybe you should buy the insurance. You're going to need it.
I'm wondering if maybe a better model might not be leasing the equipment instead. You subscribe to the iphone, send the old one back when the new model comes out. I wouldn't feel so bad about it if they could properly break these things down into constituent molecules and recycle. It just feels awful to chuck expensive electronics every other year. It feels like sin.
Re:Insurance Offerings (Score:2, Insightful)
What do you call it when an insurance company deliberately refuses to pay a legitimate claim?
Oh, right, "Standard Operating Procedure".
When the laws are tilted in favor of the insurance companies, people aren't going to have a lot of outrage if those laws are broken.
Re:how is this different (Score:4, Insightful)
I don't see why this post is modded down as Flamebait. It seems like a perfectly reasonable question. Are we supposed to assume that Apple customers are more honest than average folk and therefore express surprise that they, of all people, would commit fraud? This doesn't seem like a story unique to iPhones or Apple so I wonder why it's framed as such.
Re:It's Even More Explicit Than That (Score:5, Insightful)
Until AIG figured out it could make money coming and going by insuring other peoples assets - if they actually had to pay out the government would save them.
Gadget insurance is idiotic. The only people who carry it either (a) can't take care of their shit, or (b) intend to defraud the insurer. Because of this the premium/deductable schedule is such that you only win if you file a claim every three months - at which point the insurance company decides you're trying to defraud them and your denied coverage - and you lose any way.
Gap insurance only makes sense because a lot of people are idiots and will carry it even after they car is worth more than the loan. If you cancel it as soon as the blue book value matches yoru loan balance (usually ~12-18 months) you bought a useful service.
As for extended warranties - don't buy them. Not on cars, not on electronics, not on anything. Your laptop or your car is either going to break in the first six months and be covered, or isn't going to break until after the extended warranty is up. Even if it does break in the sweet spot, odds are what you paid for warranty coverage is about what it costs to fix your problem.
What's the difference between a subsidized product with a contract and a lease? Not much. The cell phone market is functionally a leasers market today, the only difference is that the asset has nearly completely depreciated (at least as far as resale is concerned) in the lease term.
Re:I smell cow dung... (Score:4, Insightful)
Wow. Let us look at what you call easy to break:
Imagine that. Who would have guessed that if you get water in a piece of electronic equipment, said equipment might be damaged. I am sure you use your hair drier, laptop, and radio while in the shower too.
The fact is that phones will generally survive a casual drop or incidental water contact with no damage. But, when you start submerging them or slamming them into the ground, you have moved from normal wear and tear into abuse.
Re:I smell cow dung... (Score:3, Insightful)
Re:Insurance Offerings (Score:3, Insightful)
You can disagree all you want, but you are still wrong.
What is not covered, section 2 of the policy:
2. Loss or damage caused by:
you deliberately damaging or neglecting the electronic equipment;
you not following the manufacturer’s instructions;
routine servicing, inspection, maintenance or cleaning;
the use of accessories.
If you smash it with a hammer and represent that it was an accident, to collect, you have committed fraud.
Re:how is this different (Score:5, Insightful)
than any other cell phone? i know more than a few people who have done this with more than a few different brands of phone.
I'll chop on this.
It is different because the iPhone is a status symbol first and a phone second. Thus when a new model comes out the primary function of owning an iPhone (status) is eliminated leaving you merely with a phone (gasp). In order to retain the primary reason for owning an iPhone, customers must either buy a new phone more frequently than their contract allows them to (huge cost) or commit fraud (which is what seems to be the choice people are making).
And yes, I'm not an Apple fan. I have a love-hate relationship with Apple users. I hate them and they love themselves.
Re:I find it hard to sympathize (Score:1, Insightful)
Your post is amusing.
Because they use high-pressure sales tactics (did they, or is that just your assumption? mine didn't, I bought online) - they deserve to have to pay fraudulent claims.
But at the same time, they are already charging insanely high percentages, and should lower them.
Pray, is there anything else I can deliver to you? Perhaps a back massage, or a cookie with chocolate chips, or maybe macadamia nuts?
Re:Insurance Offerings (Score:4, Insightful)
It can be very hard to tell whether a specific claim is fraud or not, yet easy to tell approximately how many fraud claims there are. A dramatic rise in claims when a new model is released would be a clue. Of course, that's not a complete indicator -- there are certainly some of those claims where people had a minor problem and weren't willing to deal with the hassle of getting the phone replaced, but were once a new model was available and they could upgrade at the same time. But, in general, the insurance actuaries are smart -- they're probably in the right ballpark about how much fraud there is, even if they can't always tell which claims are fraudulent.
(Of course, they're also motivated to have the numbers come out a certain way. But IMHO that's more likely to distort them somewhat than it is to mean they were completely fabricated.)
Re:how is this different (Score:4, Insightful)
My iPhone isn't a status symbol. It's a tool. I don't own any status symbols - I drive a beaten up car, have no branded clothes, wear a non-brand watch. You get the idea.
The primary function of the iPhone is most certainly not a status symbol to the vast majority of people who use it.
The practice has been going on in the cell phone market for *years* - long, long, long before the iPhone was released. It's not a new phenomenon, and it can be entirely attributed to "new is better than old" for whatever phone it is. It's one of the reasons the guy in the O2 shop thought it was unusual that I had a phone that was over 5 years old before I bought an iPhone, since most people upgrade the *second* their contract allows them to, or they resort to damaging the phone on purpose and claim on the warranty.
Re:Typical insurance company (Score:4, Insightful)
No.
No, it would not.
The rates set for insurance are set to maximize profits for the insurance company.
As the price increases, fewer people will purchase it. If it increases enough, few enough people will purchase it that overall profit goes down. Right before that price point is the sweet spot they try to hit. That spot has nothing to do with any costs to the insurance company, including potential fraud.
Besides all of which, the monthly price, plus the deductible, are most likely high enough that even if every single person who had the insurance smashed their phone and demanded an upgrade when a new one came out, they'd still make a profit.
I'm surprised the "suspicious" percentage is so low, actually. If the insurance company is saying two-thirds of all claims are suspicious, that means that one-third of the time they can think of no way at all the damage could have been intentional.
Simple, make the problem the solution (Score:3, Insightful)
Re:Not fraud (Score:3, Insightful)
Risk pooling only makes sense if there is a small chance of a very high cost event happening.
My phone stopped working so I have to buy a new one doesn't cut it.
Someone rear ended me at a red light and now I have a $70,000 hospital bill does.
I agree that it's not fraud, but it's an underhanded way of increasing the profit on a sale. It's like playing the gambling - it's a task on people who don't understand statistics. Unlike gambling, I've never heard someone call buying insurance "fun."
Re:Not fraud (Score:4, Insightful)
GP:
"In other words, you cover stuff that doesn't really matter."
You:
It isn't fraud...The only time it's fraud, is when the store sells an extended warranty that is so limited by its terms as to be entirely useless.
By your very own definition what the GGP and GP were describing IS fraud. The kid has basically been trained to lie about the product, implying it covers everything when he in fact knows that it basically covers nothing. So it's fraud on two counts, by the product being largely useless and the sales person misrepresenting the product. This type of thing happens all the time at Buy More...err...Best Buy and the like.
Re:Not fraud (Score:2, Insightful)
Risk pooling only makes sense if there is a small chance of a very high cost event happening.
My phone stopped working so I have to buy a new one doesn't cut it.
Someone rear ended me at a red light and now I have a $70,000 hospital bill does.
There is no absolute definition of "very high cost". You consider a $70,000 hospital bill to be such a high cost that you're willing to pay more today to avoid the risk of paying that much tomorrow. Well, some people might feel the same about a $600 phone replacement. Surely you're not claiming to know more about their finances than they do, right?
Re:how is this different (Score:3, Insightful)
I agree with this. The status symbol argument only comes from people that simply can not admit that Apple makes a good product.
And this argument only comes from people that simply cannot admit that competing phones are every bit as good, if not better.
I own an iPone because it is far and away the very best smart phone on the market. There is still no competition.
Case in point.
Re:how is this different (Score:2, Insightful)
You are so practical you selected a device that requires someone else to bless your apps?
That makes zero sense.
Re:how is this different (Score:3, Insightful)
Right, so you are judging what I use the iPhone for as worthless.
I could make all the same arguments to you about Linux (except about it being a status symbol because the UI looks like garbage), since it can't do anything useful like run the apps I personally need, therefore it must be of no value whatsoever.
Just because it does not fit your needs does not make it a "flashy, useless, pointless" item.
What other option for a smartphone would you suggest for a Mac OS X user around the time of the iPhone 3G? Blackberry? Treo? Something running Windows Mobile? The iPhone did everything that I asked it to do and continues to do that, despite other phones (including the 3GS) coming out after it.
If owning a smartphone itself is a status symbol, then I suppose I shall have to concede that, however it is a necessary one. What would be truly stupid is if I ignored the iPhone, even if it was perfect for my needs because I might get confused for some flashy fashionista by a nerd raging AC on /. who can't see it's worth to him.
You think I should have gone with a less useful solution to my smartphone needs, just so I didn't get an iPhone? Even though the iPhone was better for me?
Should I go back to using payphones and internet cafes, just so I'm not in danger of looking like I own something that might possibly make me look as if I bought it to show off?
What if I don't use it with the supplied white headphones so people know I have one, even when it;s in my pocket? (I use my own, better headphones, so you can't tell) - have I broken some code? Surely according to you I'd use the white ones so everyone knows I am using an iPhone, even though it is concealed in my pocket.
I can only laugh that you think I am deceiving myself about how useful the iPhone is to me. I can't speak about anyone else, since I am not them, but for me it is an extremely useful device. You cannot possibly comment on that. *You* are deceiving yourself if you think you are the sole judge and jury on the worth of the iPhone. "Oh, some AC on slashdot says it's useless, I'd better not use it". Yeah, right.
Re:how is this different (Score:5, Insightful)
Two words: App Store.
Two words: locked down.
Apple doesn't have the only app store for smartphones. Just the only one that places such bizarre restrictions on developers, and the only one that users can't get around by downloading apps from somewhere else (unless they want to jailbreak, which Apple contends is illegal).
My iPhone replaced a much-higher-specced, 5-year-old phone that did jack diddly shit when you got right down to it. [...] I've had my iPhone for 2 years, and it's invaluable to me.
Yes, the iPhone is better than most smartphones from early 2008 (and certainly better than the ones from 2003). But nothing you mentioned sets the iPhone apart from the other smartphones you can buy today: not the app store, not the music player, not the headphone connection, not the control schemes, not the software, not the screen, not the reliability, not even the looks. The only thing that sets it apart anymore is the cachet that comes from having a picture of an apple on it.