STIFF competition among service providers has made mobile phones so cheap that many Hong Kong consumers have decided insuring the tiny handsets against loss or theft is not economical. Take an on-the-go free-lance journalist who often writes for the Sunday Morning Post, for instance. While downing a caffeine-packed cafe latte during a break between assignments last May, her phone and briefcase disappeared. Being a victim of theft is never pleasant, but our intrepid reporter accepted the loss of her Ericsson DH338 with equanimity, even though it was not insured. 'Phones are getting so cheap, I could just go to another service provider and get a cheaper phone with a cheaper service,' she said. 'The insurance isn't worth the money.' Hutchison Telecommunications (Hong Kong), with its Digital Mobile Phone Insurance Scheme, is the only service provider to offer the territory's mobile-phone customers an insurance option. But, at $600 per year, peace of mind does not come cheap. Nor does the premium buy much - just half off the list price of a new handset. Still, the policy does fill a need in the market. A securities researcher, who prefers to remain anonymous after losing his phone four times in five months, said: 'For me, I think it is a good deal.' With a red-hot price war under way among service providers, however, few consumers pay list price for their phones. Two months ago, for example, SmarTone Mobile Communications was selling Ericsson GH388 digital-network handsets for $4,680. Today, it offers them for less than $3,680, according to a shop supervisor for competitor New World Telephone. Sometimes handset prices shrink to nothing. As part of a promotion that ended in December, Pacific Link Communications was giving away DH338s. Hong Kong's plummeting prices are reminiscent of what has happened in Britain, Scandinavia and the United States, where providers regularly use promises of free handsets to lure customers into their networks. In addition to the price-cutting common to most developed markets, Hong Kong consumers are also benefiting from an intensified scramble for market share sparked by the Government's granting of six licences for a new mobile technology, Personal Communications Service. With even-keener price competition likely to be on the way, handset insurance could disappear altogether. An Eagle Star Insurance Group spokesman described Hutchison's scheme as an 'antique' left from the days when handsets were expensive. Instead of offering insurance, for example, Hongkong Telecom CSL has turned loss and theft into a marketing opportunity that binds subscribers more tightly to the company's service. Those who lose their phones are promised 20 per cent off a new handset - at list price, of course - and a reconnection-fee waiver.