Case study: Console Insurance

The only extended warranty I've ever thought was a good deal was the one Fujifilm offered on my F20. Which is a great little camera that isn't made any more but, along with the similar F30 and F31, sells on eBay for more than the original new price (~£100-150). The really good thing about this warranty? Unlike every other digital camera warranty anywhere, it covered liquid damage! For £12/year!

(The camera has since been accidentally ruined by the older teenager, who got something jammed in the zoom lens barrel. I have the F70, the ostensible successor to the F20/F30/F31 series, but it's really not very good at all. Need a compact with ridiculously high ISO that is at least as nice.)

Note that statutory warranties (of fitness for purpose) are much better in the UK and Europe than in the US. This particularly applies to anything bought mail order. But the shops (particularly the Dixons Group) still try to sell you a near-useless shop extended warranty.

Consumer goods are all disposable, and especially electronics. This is why I've always experienced terrible unwillingness to spend more than £100 on a computer - I think of computers as things employers buy and depreciate quickly.

Edit: And just nabbed an F30 on eBay for £90.50 inc post. w00t!

Oh, and case studies of practical application are great stuff. Keep it up!

I write in response to your introductory paragraphs.

Interestingly, most insurance companies give out more money in claims than they take in in premiums - this being a cost of doing business that must be paid for the privilege of holding the "float", being the money held by the insurer which has not yet been paid out as claims. This money is held in some form of investment, often dominated by government bonds, which produce a yield small relative to the float - but large compared to the capital invested in the company as the float should be much greater.

Thus, for an average cost which is slightly less than the yield one would get on their invested premiums the risks of a catastrophe are sold. I would generally refer to that as "fair" as you put it, though I would prefer to avoid the pitfalls of such a subjective term, and I would agree that extended warranties are an "unfair" method of abusing consumer ignorance.

Insurance offers good salesmen the opportunity to take money from those who are too weak or manipulable to say no, even to things they know are bad deals. I don't think many people buy console insurance because they actually believe it's worthwhile.

I think GameStop offers a somewhat better offer, giving you a replacement even if it's your fault the console was damaged.

And yeah, the buyback program does sound like a ripoff in general; if it applied to movies or video games, it might be worth something, but, looking at the web page for the buyback program, it seems to me that most covered products aren't the kinds of things you'd normally want to return after six months.