The similarities between the iPhone X and I90 (Insure/90) - Part 2RSS icon

Written by Sumit Sethi on Tuesday 26 September 2017

The new iPhone 8 launched last Friday (22nd September) and surprisingly, to little fanfare, both in terms of queues and sales. Commentators have begun declaring an end to the iPhone era, with Apple’s Market Capitalisation dropping $55billion since the iPhone event just over two weeks ago. However, some commentators have acknowledged the iPhone X (releasing in November) as being the reason behind the lack of buzz around the iPhone 8.

Following on from Part 1, where I listed the similarities between deciding whether to upgrade to the iPhone X to those faced by an Insurer deciding what to do with its legacy software, I will now elaborate on my TCO-based approach.

I got my first mobile phone in 1997, the Nokia 8110 (the Banana phone for those old enough). Thereafter, a range of mobile phones followed from my first colour phone in 2002 (T68), my first integrated camera phone in 2005 (K750i), my first smartphone in 2008 (Bold 9000) before getting my first iPhone in 2010. In total, I’ve had more than 14 mobiles, changing them on average every 18months.

During the same 20-year period, some Insurers have retained their legacy systems like I90, which effectively is the same product as my Nokia Banana phone in 1997. This is not to say that they haven’t integrated with other services including websites, built new products, and applied upgrades, but it does pose the question of when should an Insurer move on from their legacy system.

My simplified TCO approach included the software e.g. iOS, which is included with the infrastructure/hardware of the device itself, telecoms being the mobile network (contract, sim-only etc.) and desktop services/support being the warranty/insurance, with only the labour component being excluded. This allowed me to undertake the following decision process:

  1. Understanding the TCO of my mobile phone: Having got my iPhone 5s four years ago on a 2-year contract, I moved to sim-only for the next 2-years. This variation provided some invaluable insight -
    1. During my contract (with higher usage allowances), I exceeded the monthly tariff 23 times out of 24months, spending 24% above the lifetime of the contract
    2. In contrast, I saved 17% on average per month from the sim-only through introductory deals, changing providers part way and occasionally downgrading my monthly plan
    3. I factored in the upfront fee, insurance premiums, iCloud monthly storage fees, incidentals of one insurance claim excess and one repair fee to Apple
    4. The monthly TCO for my mobile phone illustrated over different time-periods:

  1. Deciding what to do: Using the 8 truths from Part 1, I factored them into the options that I faced -
    1. Do nothing - The new iOS 11 will likely be the last major iOS update made available on my iPhone 5s, but more worryingly, the lack of storage on my phone has gone from being an inconvenience to a daily battle. In year 3, I was ineligible for mobile phone insurance due to the age of my device, therefore I had to pay Apple £129.99 to repair the phone. This contrasts with the £50 excess that I had paid when I had the same issue (a cracked screen) whilst insured a few months previously. Therefore, doing nothing is not viable.
  1. Buy a non-Apple phone - Android is the obvious alternative and even BlackBerry runs on Android nowadays. I’ve been monitoring the Google and Samsung flagship mobiles since 2015 but they habitually track Apple in increasing their prices year-on-year. Android and its supported handsets tend to adopt innovative features quicker, but I have more confidence in accepting Apple’s higher price-point in exchange for their overall quality offering and I have experienced their phones lasting longer. Finally, my Apple Watch has fundamentally changed my attitude to general fitness and without a credible alternative, I place more importance to staying in the Apple ecosystem due to my Apple Watch. Therefore, a non-iPhone is not viable.
  1. Buy an iPhone - The iPhone 8 very much looks like an updated iPhone 7, but it does have the same A11 Bionic chip as the iPhone X as well as wireless charging. The camera features and battery life are the same as the iPhone 7 and the price-point is somewhat similar. Whilst the iPhone X is a new phone, where Apple have moved the agenda forward with Augmented Reality and Face ID, I can’t see much value for me with these features just yet, especially with the £1,000+ price-point. So, for the first time in my phone purchase history, I’ll bypass the flagship model when upgrading. Therefore, iPhone 8 is the selected option.
  1. Understanding the break-even point and having an exit plan: My decision in selecting the iPhone 8 is a tactical move rather than a strategic one. I have learnt that by ‘sweating your assets’ i.e. keeping my iPhone 5s for the last four years, it is now of little resale value, especially with the superficial damage sustained over such a long period. Ideally, I should target to keep my iPhone 8 for between 24-30months due to insurance coverage, storage and iOS considerations, as well as resale value; any longer, and it does become counter-productive. During this time-period, Android might have a credible alternative to the Apple Watch, and the forthcoming Google Pixel 2 or Samsung S9 might even tempt me away.
  1. Deciding the financial basis: Having looked at various contract deals including a ‘friends and family’ option, a 2-year contract for me is either £53 (64GB) or £79 (256GB) more expensive than buying the handset outright and using a sim-only deal. From experience, whilst I want to avoid the false economy of getting the smallest memory variant, I know that I can sustain 64GB comfortably for 24-30months. Therefore, I will buy the iPhone 8 (64GB) from Apple this coming Friday (29th September) and opt for a sim-only deal, with a forecasted monthly TCO for a 2-year period:

As my decision is tactical, I place more value in the flexibility of changing either the service provider or even the device. Even if I factor in one claims excess payment during this period, when extrapolated, it will only add a few pounds per month. Therefore, the TCO difference for my old iPhone 5s vs. a new iPhone 8 is nominal, and after factoring in storage, support and security (iOS), the new purchase becomes more logical. Having said all the above, I must confess that 8 is my favourite number… so I suspect that I was always going to get the iPhone 8!

From an absolute perspective, an Insurer’s decision on upgrading their legacy system involves complexity and impact far beyond the scope of this article, but their decision-process is in line with the approach outlined above. Determining the TCO enables the benchmarking of options, and more importantly, it allows for a two-way link with strategy. Just like my fondness for Apple products, I must equally confess that I look forward to seeing I90 and its peers running into the 2020’s, but principally for those who have understood their TCO.

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