Extended Service Plans: Getting Down to Business (1)

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Extended Service Plans Getting Down to Business

• As a retailer, you know that extended service or
  warranty plans are a natural product offering for
  your business. Theyre both comforting to
  consumers and profitable from a business
  perspective. But how much do you know about how
  your warranty programs work? Who are the players
  involved and whos responsible for the various
  elements in fulfilling the plan? Whats your
  return on investment? Understanding the life
  cycle of your warranty plans not only impacts
  your customers and profit margins, but also your
  brand.
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• Start Here
• Filling in the family tree of a warranty program
  can be a confusing process. Whos responsible for
  what, when and for how much can be seen as a
  burden that many retailers choose to disregard.
  But, unless you know the answers, youre leaving
  your store and customers at risk. 

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An easy starting point is uncovering who the
insurance company is thats covering your plans.
The insurance company, or underwriter, is the one
who insures claims liabilities from the warranty
contracts. Its important to look for insurance
companies that are well-managed and
well-capitalized because they are truly the
foundation of your plans. This is the company
that youre building your reputation on when
claims need fulfilling, even if your business
fails. This is the group that needs to be
trusted, vested and insured so you and your
customers can have peace of mind.    Next Steps A
service contract provider is the company that is
legally and financially obligated to repair or
replace the customers covered product. This
company is your business partner. They create and
administer customized extended service plans on
your behalf to meet your operations needs,
customer expectations or product requirements,
and in return, collect a fee for their services.
Full disclosure of costs and margins is important
because once plans are agreed upon with the
service contract provider your store is able to
mark them up accordingly or offer them to
consumers at recommended retail prices.  If
youre not sure what youre paying for, you have
every right to ask your service contract provider
a few questions to level the playing field 
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 1. How is your cost divided between insurance
and administration?  2. What is each entitys
profit margin? 3. What is the program loss ratio,
both overall and by product? If your loss ratio
is very low it should give you the opportunity to
lower prices to sell more ESPs, be
more competitive or collect more profits and put
them in your pocket. 4. Am I going to receive all
the information I need on a regular basis to
ensure I am getting the best price and product
compared to the market? 5. Do you participate in
a profit sharing program with your insurer?  6.
Is my program compliant to protect my companys
brand reputation? Have all statutory compliance
and filings been addressed?  7. If there is an
insurer and/or re-insurer involved, what is the
financial strength rating of each and who is your
contact at the insurer?    The service contract
provider and warranty administrator (or third
party administrator) are usually the same
organization. As a customer facing group, its
critically important that your store has access
to a contact person and your customers find it
easy to work with this organization. They are
also responsible for training your sales
representatives on the ins and outs of selling
warranty plans and how to facilitate a claim. 
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Since youre paying the administrator a fee, you
want to align yourself with well-respected
companies that work hard to earn trust and
deliver on expectations for your store and your
customers. Working with administrators that allow
communication with all parties, including the
underwriter, keeps the relationship in check and
ensures plans operate smoothly and adhere to
specific terms and conditions. Additionally,
administrators contract with repair facilities to
repair or replace covered products, so easy
access and open lines of communication are
essential in this relationship to ensure the
parties involved you and your customers get
what theyre paying for.     The Customers
Role The service contract is an agreement between
the service contract provider and your customer.
The service contract terms and conditions may
state that for service or to report a claim, the
customer should call a separate number to contact
the warranty administrator. For your store,
keeping the administration and underwriting under
one umbrella provides a hassle-free arrangement
that ensures warranty plans deliver positive
results for customers throughout the life of the
plans.
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Is Your Plan Working? While creating an effective
warranty program certainly takes a little work,
becoming educated about the process and asking
the right questions to ensure youre partnering
with the right service contract provider is
critical to the success of your business. Bottom
line, knowing who the extended warranty players
are and how they impact your business can mean
the difference in profit and loss of revenue
and customers.  Article Resource-
https//warrantech.com/blog/june-2015/extended-ser
vice-plans-getting-down-to-business/