Phil doesn't say he reported the phone lost / stolen - just that the insurance "will pay the remainder of your contract off if you decide to cancel before the term is up" ie, it's a perk of the insurance that it gives you a contract get-out option.
Having said that, false reports of mobile phone thefts do skew the crime statistics quite significantly - even fueling the current "rampant Gun crime" statistics. A good proportion of the reported "gun crimes" are as a result of the following scenario...
Oik: Damn, this phone's 3 months old and it's well out of date, I wanna new one. I know, I'll say it's been nicked.
(on phone to insurance provider fonefarm monkey)
Oik: Me phone's bin nicked, can I have a new one?
Monkey: Oh, your phone's been nicked has it? What's your crime reference number from the police?
(Oik hangs up on monkey)
Oik: Damn, gotta report it to the cops. Oh well, I'll spin 'em a line...
(at the cop-shop)
Oik: I need to report my phone's bin nicked.
PC: I need to take some details. How did it happen?
Oik: erm, this bloke mugged me in the street.
PC: Oh, I see, did he threaten you or anything?
Oik: err, yeah, he pulled a gun on me, I had to hand it over otherwise he'd have killed me.
Next thing you know, Daily Mail headline: Gun Crime Out Of Control