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Extended warranty programs can be comprehensive, some might say complex, but they're certainly not scary. As service contracts/extended warranty programs have evolved, typically the added complexity involves compliance, product development and execution. For example, a service contract administrator markets and administers a service contract program. The administrator may also be the obligor, the party obligated to pay for the repairs under contract, or there may be a separate entity taking on the responsibility of the obligor. These entities may also be separate from the retail dealer or channel partner actually selling the contract. In turn, the obligor may purchase an insurance policy, technically a service contract reimbursement policy, from an insurer. This not only adds to the complexity of the service contract program, but also requires greater coordination between the parties in order to create a seamless experience. Ultimately, these sort of complexities eliminate risk for the contract seller and the consumer, providing stable financial backing for the program's obligations.1
What an extended warranty covers varies greatly by product, by coverage and by fulfillment. Most service contracts or extended warranty plans fall into one of six basic types:
Some retailers sell b-goods or scratch and dent products. Typically the OEM ‘marks’ these products and does not offer a manufacturer’s warranty on them. These products are operational! They usually just have cosmetic damage. Retailers can sell them for deep discounts. However, with no OEM warranty, consumers have no protection. On boarding a warranty administered by a third party is a great way to drive b-goods sales, by offering peace of mind that the consumer can rely on if the product fails. These programs are typically sold on every b-good going out of the store.
These plans begin on the date the customer purchases the product from a retailer and wraps around the OEM warranty, often providing additional benefits like food loss or no lemon protection.
Extension plans extend the manufacturer's warranty for a specified period, usually from 90 days to up to one year, or longer depending on the term purchased and cover mechanical break downs, as an OEM warranty would.
4. Major Component Programs
Also known as "primary protection" plans, these programs insure only the product's major component, such as the picture tube in a television, and generally do not include labor costs.
Oriented toward products selling for under $100 retail, replacement programs guarantee product replacement if the item should fail during the term of the plan.
Under deductible programs, the consumer is responsible for a certain amount of money, such as the first $50 in repairs to offset the cost of the total repairs for the underwriter. Deductible programs are cheaper than non-deductible programs as the consumer bears some of the cost of repair.
Some products, mobile products specifically, can be covered by accidental damage from handling (ADH) programs, which can be insurance instruments in some states. These plans pay for the replacement or reimbursement of mobile products damaged from accidents due to handling them. That's the key word in fact, 'handling them'. An insurance partner once described them to us by explaining that you can 'handle' a phone or a laptop, but you can't handle a TV mounted to the wall. Hence, products covered under ADH programs tend to be hand-held, by nature.
Like ADH programs, loss and theft programs can be insurance programs. They typically offer protection from the loss or theft of mobile devices.
Home warranties are regulated differently than the plans above. They also cover different products insomuch as they cover appliances plus home systems like HVAC, plumbing and electrical, and even utility lines and pools. There are also state-based sales licensing requirements which tend to limit distribution by all but home warranty obligors. These programs, like HomEase, drive real value for consumers at the point of purchase, but also real downstream revenue for manufacturers, retailers, and service providers, as they can be used as upsell options for consumers whom purchased an extended warranty instrument, or even one who didn’t, using traditional as well as new digital marketing strategies.
OnPoint provide manufacturers, retailers, and service providers with warranty underwriting, manufacturer warranty administration, service contract and extended warranty programs, home warranty plans, and service fulfillment through our network of vetted, 3rd party service providers. We drive revenue and reduce risk for our clients, through solidly underwritten, expertly administered service programs that deliver the best in CX, driving consumer back again and again, increasing the lifetime value for each consumer relationship.
Jenniffer, a 25-year veteran marketing, operations and CX executive, has demonstrated success in driving growth and execution for global service industry companies like OnPoint Warranty Solutions, ServicePower, GE, Service Net and Accent Marketing. Jenniffer is a certified 6 Sigma Green Belt, GE MDC graduate, former board member of the GE Louisville Area Education Advisory Committee and Elfun Chapter, co- chair of the GE Women’s Network Community Service Committee and was named one of the 30 Most Inspiring Women In Business in November 2017 by Insight Success Magazine. She was named a 2019 Powerful Woman in Consumer Technology by Dealerscope and was a 2019 Stevie Award Woman in Business Bronze winner.
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