Branding of Product Protection Programs

By: Jeff Hatch

January 06, 2015

A recent trend in the service contract industry is the emergence of administrators attempting to create a strong brand identity with consumers. Many administrators are working diligently to create brand recognition for their organizations by branding the protection offerings they sell through retail partners. The question is often asked, "Is this new approach in the best interest of the retailers?"

AMT Warranty and its subsidiary Warrantech's view is that the recent "brand building" business models employed by many administrators in the industry serve only to benefit the administrators and not their retail partners. This belief is derived from our core philosophy about the purpose of service contract programs. It's indisputable that service contract programs should provide important incremental revenue for retailers. However, our view is that a well-designed and maintained service contract program should drive customer loyalty and retention for the retailers selling the service contracts.

We view each service contract claim as an opportunity to enhance the trust between a customer and our retail partner who sold the underlying product and associated service contract. Product failures happen. When they do, customers feel a level of frustration. While it's true that the retailer is generally not the manufacturer of the product, customers often associate the product issue with the retailer who sold it to them. We believe that the solution to the product failure is best provided through a retailer-branded service contract in order to reestablish the trust that may have been diminished by the product failure. As a result of the service contract, retailers (through their administrator) are given the opportunity to engage in a highly personalized marketing campaign with a customer who at that moment may be their biggest detractor. We view this as micromarketing with macro effects.

In the emerging administrator-centric model, the solution is provided to the customer under the administrator's brand. The positive customer interaction and goodwill generated from resolving the customer's issue serves only to enhance the value of the provider's brand. That goodwill is retained by the provider, even after their relationship with the provider has ended. Even more problematic is that the administrator may also be marketing service contracts directly to consumers, including the customers of their retail partners. In essence, by agreeing to market service contracts under the administrator's brand, retailers could be promoting a competitor's offering to their customers. Moreover, the retailer has established a new relationship between their customers and a potential competitor. We feel that the resulting consequences for permitting administrator-branded service contract programs will have long-term financial implications for retailers as the strength of their administrator's brands increase in the eyes of the retailers' customers. 

While the desire of administrators to build their own brand value is understandable, retailers should be wary of the consequences.

Filed Under: administrator, brand, branding, contract, customer, product, program, protection, retailer, service

How Well Do You Know Your Service Plan/Warranty Administrator?

By: Jeff Hatch

December 23, 2014

Service contracts and extended warranties can be a great source of revenue for retailers, manufacturers and distributors. And their use as a customer satisfaction and retention tool can never be overstated. But what happens if your administrator ceases operations or is otherwise unable to service your business?

To be an approved administrator, certain licenses must be obtained along with proof of financial stability. Most administrators in the marketplace satisfy this last requirement by securing a contractual liability insurance policy (“CLP”) issued from an insurance company. This CLP requires the insurance company to “stand in” for the administrator in the event the obligations to the consumer have not been met. But what happens if the insurance company cancels the administrator, cannot provide administrative capabilities or ceases operations?

While the name of the administrator, and often the insurer, is listed in the service contract, when the customer seeks payment of a claim or a return of their funds, and the administrator and/or insurer no longer answer their phones, where does the customer turn?

Throughout the years, there have been numerous instances where either the administrator and/or the insurer of a service contract program have gone out of business or otherwise ceased operations. When this happens, your customers may not get their claims paid or their refunds processed and YOU will be their target of ire and will often be compelled to make good to the customer out of your own pocket.  How do you prevent this?

At AMT Warranty and its subsidiary Warrantech, we believe it is critical that you know and understand the capabilities and financial wherewithal of your administrator and your insurer. Conducting due diligence and asking the right questions can make all the difference between a service plan program that provides you with revenue and customer satisfaction and one that is a customer service and financial nightmare.

To ensure your service contract providers will be there when your customers need them most, we believe you should be asking the following:

• How long have they been in business?
• What is the experience and background of their management team?
• What is the size of their business?
• What is the ownership structure of their business?
• What is their Better Business Bureau rating?
• Who is their insurer?
• How many insurers have they had over the past 10 years?
• Are they and the insurer under common ownership?
• What is the insurance structure of the CLP (e.g., is the insurance company standing in on the “first dollar” of risk or are they simply providing an excess of loss policy)?
• If your administrator is using an “excess of loss policy,” is your administrator reserving sufficient monies needed for the potential risk not covered under the insurer provided policy?
• How long has their insurance company been in business?
• What is their financial size and A.M. Best rating?
• Are the respective companies compliant with SOX, PCI, SSAE 16, etc.?
• Do they have audited or public financials?
• Have you visited their facilities?
• Are they outsourcing any critical functions?
• Are you doing reference checks?

A well designed and maintained service contract is only possible if all of the parties to the transaction are fully capable of performing their various roles and can weather periodic or irregular changes to their business model or performance, especially if your provider is not vertically integrated with the insurance company.

Filed Under: administrator, business, claims, contract, financials, insurer, manufacturers, retailers, service, warranty

Tips For Buying A Vehicle Service Contract

By: Jeff Hatch

December 17, 2014

A vehicle service contract (VSC) is a smart investment. It can help cover the cost of unexpected repairs and keep your vehicle running at its best. But how do you know if the plan is right for you? Here are a few questions you can ask your VSC salesperson to make sure you know exactly what you’re getting.  

How Much Does The VSC Cost?
Obviously, money is one of the most important factors in the decision-making process. Is your vehicle worth the investment? If so, you’ll want more coverage, which means more money. However, the amount you pay now could add up to hundreds of dollars in savings later. 

What Does The VSC Cover?
Consider your driving habits and the make and model of your vehicle. For instance, if the company who manufactures your car is known for the quality of their interior components and you plan on keeping your vehicle in a garage, then you probably don’t need paint and fabric protection as part of your VSC. 

How Long Does The VSC Last?
Again, the way you drive has a big impact. If you plan on keeping the vehicle for several years or know you’ll be spending a lot of time on the road, then having a VSC makes a lot of sense. You’ll also want to know if your vehicle is currently under a manufacturer’s warranty since the VSC typically goes into effect after the manufacturer’s warranty expires.

Who Backs The VSC?
Make sure that the company behind your plan is reputable. Some good indicators to help determine credibility include an A.M. Best rating, which demonstrates financial strength and stability, and a Better Business Bureau rating, which assesses the company’s business practices. Also, look at how long the company has been in business and examine their background.

How Are Services And Claims Handled?
Find out if the company has a network of service providers. Are they in your area and readily available to work on your vehicle? Once this has been determined, inquire about claim submission and processing. Can you submit claims online? Does the company have a reliable customer service department to assist you? And do they provide fast and convenient service to help get you back on the road as soon as possible?

Don’t Be Afraid To Ask Any Other Questions You Might Have
You should never feel pressured into purchasing coverage that you don’t understand. If there is anything about your vehicle service contract that doesn’t make sense to you, don’t hesitate to ask. Always remember, it is the salesperson’s responsibility to assist you. If you don’t feel that you are getting the help you need to make a proper purchasing decision regarding your VSC, then you probably aren’t going to get the right help should something go wrong with your vehicle.

Got a question about one of our vehicle service contracts? Contact us online at https://warrantech.com/contact-us/ or call at 800.833.8801. We’re happy to help.

Filed Under: A.M., automotive, Best, Better, Bureau, Business, claims, contract, service, vehicle, VSC, Warrantech

Extended Service Plans: What’s Behind All The Fine Print?

By: Jeff Hatch

December 03, 2014

Using a single-source provider for underwriting and administration offers gains in profit and service.

The real question isn't what's behind the fine print, but rather who is behind the fine print of an extended service plan. In today's economic climate, retailers need to be diligent in determining who can financially back and service their products with plans that don't negatively impact bottom line results or customer relations. While some retailers prefer to act as their own administrator for service, the overhead costs and time required to facilitate work orders, customer service and repairs can often lead to eroding profits and dissatisfied customers. For retailers that opt to rely on an outside provider for administration or underwriting, it can expose your business and customers to financial risks and service levels that don't align with your business goals.

As a retailer, customers trust that you'll stand behind the products you sell with service plans they can rely on. Now, more than ever, retailers need to select partners that not only provide sound financial backing but also the service required to assist when customers need it most. By working with a single-source provider for underwriting and administration of extended service plans, retailers can focus on sales knowing that the money saved and service gained from a customized program can deliver profitable margins and elevated service that keep customers coming back.

Understand the Plan

Knowing the difference between a credible underwriter and administrator is an important distinction to make and one that definitely needs to be evaluated before committing to a company or a program. As a first step, make sure you understand the responsibilities and differences between an underwriter and administrator. An administrator is the company that handles the day-to-day administration of the product's extended service plan such as processing claims and accepting monthly payments for the service. Often, the administrator's name and contact information is featured in the customer literature about the plan. The underwriter is the company that is ultimately responsible for the financial backing of claims according to the terms and conditions of the plan. 

Since not all administrators underwrite their own plans and vice versa, there are a number of extended service plan options available that allow retailers to customize a plan that's right for their products. However, the logistics of how a plan is carried out and who carries it out can reveal service inefficiencies, limited profitability and financial burden. In fact, according to some sources, a significant percent of administrators don't underwrite their own plans. The volatility of this approach can cause a number of problems for retailers including lack of funding or term changes that can become the retailer's responsibility in the event the provider declares bankruptcy. While this used to seem like an improbable situation, the recent filings of numerous multinational insurance companies make this harsh scenario a genuine reality.

Once you understand the roles of an administrator and underwriter, evaluating the provider's approach to maintaining financial responsibility and customer service will help determine the best program for your needs.

Financial Accountability

The most important point to consider when evaluating single-source plan providers or underwriters is the financial strength of the insurance company backing the program. If the company is financially unable to provide the benefits required, then you lose money, customers and credibility. Publicly traded insurance companies are an open book when it comes to examining financial status. Some areas to pay attention to include: historically good capital, recent acquisitions, ongoing organic growth and operating cash flows. Several organizations, including A.M. Best, Standard & Poor's and Moody's Investor Service, rate the financial strength of insurance companies. These ratings are among the most widely used indicators of an insurance carrier's financial health, or lack of it. Using these tools to assist in your evaluation is not only credible but universally accepted.

Customer Focus

The most important thing to your customers when they purchase a product with an extended service plan is how they will be cared for should something go wrong with the product. When a product fails, you need to rely on a responsive administrator to diagnose and troubleshoot the problem for customers in a timely and efficient manner. To help evaluate response rates, retailers should look at a provider's First Call Resolution rate, technical training for staff and network of service centers to ensure convenient and expeditious repair of products. In addition, service offerings such as fulfillment which includes carry-in, in-home and depot offerings or fulfillment by means of a new product, gift card or co-pay voucher delivered to the customer help maximize customer satisfaction.

Excellence in customer service is not an idle commitment so it's also important the provider shows how they successfully track, record and evaluate customer satisfaction to ensure they are meeting service level commitments. Another aspect to consider is how the administrator evaluates product reliability to continually develop competitive rates. Through comprehensive risk analysis, the provider can structure the extended warranty program in the most cost-effective way for the consumer yet profitable for the retailer.

While there are several factors a retailer needs to consider when choosing an extended service plan program, often the easiest and most profitable is working with a single-source provider for administering and underwriting the program. By selecting a full-service provider, you also have the benefit of flexibility in plans, categories, features and benefits to fit your needs and, more specifically, your customers' needs. While the fine print can be a bit overwhelming, selecting a single-source provider with proven credentials can help enhance revenues and build customer loyalty.

Filed Under: administrator, extended, plan, provider, retailer, service, underwriter

NIADA Certified 2.0

By: Jeff Hatch

August 23, 2014

The following article appeared in the 2014 August issue of Independent Dealer and can be found in its entirety at: http://bit.ly/2mpQFBi 

Reintroducing the national CPO program that was built by dealers, for dealers
 
Certified Pre-Owned has become the industry buzzword lately. The CPO model, created by the franchise dealers and OEMs, has set a new standard for used car sales and redefined the way customers shop for cars. In 2013, sales of manufacturer-certified pre-owned vehicles totaled a record 2.1 million units. 
 
National, high-dollar marketing campaigns have educated the car-buying public about the benefits of buying a used car that has been certified, so much that it has now come to be an expected part of the process. Much like a missing CarFax, if a car has not been certified then the customer starts to wonder what the dealer is hiding. 
 
For the most part, independent dealers have been left out of the CPO game. Good dealers, of course, have always inspected their cars and done their best to represent the condition of the vehicle as accurately as possible and some will even stand behind their inventory by offering some type of limited warranty to ease the mind of a wary customer. Even so, customers can still be a little skittish of a dealer-endorsed certified car and many will end up paying more at a franchise dealer’s used car lot to get the label they are after. 
 
That all changes, however, with the re-introduction of the NIADA Certified Pre-Owned program. NIADA Certified has been around for a few years, but recently underwent some extended enhancements and tweaks that have made it an attractive option to customers and a powerful profit-center for dealers.
 
“The NIADA Certified program allows independents to play on an even field with the new car dealers,” said NIADA Senior Vice President Frank Fuzy. “It’s 50 percent easier to sell a car that’s been certified and has a warranty, and we know that today every sale counts!”
 
The NIADA Certified program is backed by Warrantech, an The Amynta Group. NIADA approached the company earlier this year to retool the program and develop something that made sense for independents. Warrantech, who has worked with several other national partners to build similar programs, compiled all the data they could from dealers, consumers and associations to create a program that they say was “built for dealers by dealers.”
 
“We basically asked ‘what do you want’ and then we listened to what everyone said,” National Business Development Manager Natalie Suarez said about the changes to the program. Since it kicked off in January the number of dealers using the program has quadrupled. Suarez says dealers understanding exactly what CPO is, and can be, is part of the reason. 
 
“Customers want peace of mind. They are looking for cars that are advertised and branded as something they can trust and have been thoroughly checked out. NIADA Certified gives them a guarantee,” Suarez said. 
 
Some of the biggest changes to the new program include:
 
Three very flexible CPO Limited Warranty programs which include Basic, Standard and Enhanced options
CPO coverages for vehicles up to 14 years in age and with up to 150,000 miles
100 percent credit of the CPO Limited Warranty investment if the customer upgrades to an NIADA VSC contract
No surcharges
Enhanced NIADA CPO marketing resources, including large window banners, lot flags, etc.
A more seamless, less time-consuming CPO contract form processing procedure
eBay Motors promotion and inventory listing support/endorsement
ASE certified technician vehicle inspection requirement enhancing validity to the customer
 
NIADA Certified is exclusive to NIADA members (FIADA members of course gain NIADA membership automatically). Dealers choose which vehicles they want to certify, as well as the terms (3 months/3,000 miles, 6 months/6,000 miles or 12 months/12,000 miles) of the warranties. Current model year plus 14 year units with zero to 150,000 miles are eligible. There is a cost to the dealer to certify, however, if the customer upgrades to a service contract the fee is waived. Even if they don’t, however, the value added with the certified status can cover the cost. 
 
“There is a small cost to it in the beginning, but it gives leverage to the dealer to ask for more money in the price because of the value it has being certified. Consumers will and do pay more for certified,” Suarez said. 
 
“If you ask them, about one in four customers will upgrade to the service warranty, so the program really pays for itself,” Fuzy said. His dealership has seen so much success by utilizing NIADA Certified that he jokingly says he doesn’t want other dealers to know about it. 
 
“Don’t do it,” Fuzy teases to the other dealers, “because your sales will increase and you’ll be competing with me.”
 
There is more detailed information about NIADA Certified at the official website that has been created for it at www.niadacertified.com. To find out more, you can also call the FIADA office at (800) 237-0448 or go to the website at www.fiada.com

Filed Under: certified, CPO, Dealer, FIADA, Independent, NIADA, pre-owned, Warrantech

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