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
How Well Do You Know Your Service Plan/Warranty Administrator?
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 operationsWhen 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.
For more information about Warrantech free visit here:-http://www.glassdoor.com/Overview/Working-at-Warrantech-EI_IE2104.11,21.htm