Insurers get in tune with the iPod generation

For millions of consumers, music downloads are replacing CDs and - for those dinosaurs who just can't let go - vinyl as the way they like to listen to tracks by their favourite bands.

But what if your treasured collection is destroyed by fire or flood or carted off by the local cat burglar? You can claim on your insurance for records, tapes and CDs but, at least until recently, any compensation request for lost music downloads will have fallen on deaf ears.

And a similar attitude will have applied to any claims for cash to replace lost games, ringtones and films.

But the record is no longer stuck, for insurers are finally waking up to the iPod generation, offering cover not just for our gadgets but the "intangible assets" held on them.

Nationwide has been the trail-blazer, including music and other entertainment downloads as standard in its home contents cover. The building society argues - and a lot of iPod users would agree - that these virtual music collections count as family valuables, just like CDs and old LPs. Other insurers are considering a similar addition to their home contents cover.

Given the growing sales of music downloads, it is likely that, in a year or so, most of the industry's big players will have rewritten their policies to include the content of our portable music players, phones and laptops.

With momentum provided by the launch of legitimate online music shops such as Apple's iTunes and Napster, legal downloads have been outstripping "physical" sales of singles since December 2004, reports the British Phonographic Industry.

A recent report by Screen Digest, an analyst, claims the market has also been driven by the growth in broadband internet use, as well as strong sales of iPods and other MP3 players.

According to the report, the total European market for online music will have more than doubled from £82m in 2005 to £190m by the end of this year. And by 2010, it predicts, this figure will have hit the high notes of £750m.

More than 7 per cent of us now have a portable music player, up from 2 per cent in 2004. By the end of 2005, Europe had 29 million of these gadgets, and the prediction is for over 80 million by 2010.

These figures could rise further still if free legal downloads from SpiralFrog, the New York internet start-up, catch on.

And it is not only music downloads - at around 79p a track or £7.99 an album - that are growing fast. Apple, it was revealed last week, is working on a widescreen iPods that will allow users to download full-length feature films legally. The cost will be around £10 a time and the films should be available the same day they are released on DVD.

Already, hundreds of websites are offering film downloads to laptops and PCs. Prices vary widely - as does the quality, and the legality, of the product. Games are another growth area and sales of ringtones are booming.

Nationwide's cover is for any download - ringtones, games, films or music - wherever it is held, be that a phone, PC, laptop or music player. The important point is that the owner will have to prove they have paid for the download.

This is quite easy to do as most people who buy music online do so on a particular account such as iTunes. A record of all transactions is stored on the account and can be accessed on the internet. Credit card statements will provide further proof of purchase.

The cover is for fire, theft or flood - but not for accidentally wiping your computer's hard drive. Even though the policy offers accidental cover for other bungles in the home, this is a specific exclusion.

Some online music shops give buyers more than one opportunity to download, and Nationwide expects customers to attempt to recover their tracks in this way before making a claim.

The building society has not enjoyed a universally rapturous reception, with some critics labelling the new cover a gimmick. "Most people download to a PC then transfer to their iPod, so they would still have the tracks stored if the iPod was stolen," insists Adrian Webb at esure, the online insurer.

That said, if fire or flood destroy your home, or if it is cleaned out by a burglar, your computers and your music players could all be gone for ever.

Mike Holliday-Williams of insurer More Th>n is less sceptical about the cover. "Electronic goods such as iPods, BlackBerries, mobile phones and laptops are expensive to replace - especially when you consider the value of downloaded material held on them, which can often be overlooked," he says. "The way people are living their lives is changing and insurers need to respond."

Esure may have its doubts about covering iPod downloads, but it is adapting to the new technology in other ways. The insurer has just issued its policy documents for motor and travel cover as a podcast that can be downloaded.

"Our customers no longer need to worry about carrying their insurance documents with them when they travel, as they can access all the details they need on their iPod," says Mr Webb. The company has called its new scheme a "pol-cast".

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